Even as the new bankruptcy law comes into effect, companies continue to queue up at the Board for Industrial and Financial Reconstruction (BIFR) to file for insolvency. Nearly 80 companies had approached BIFR till mid-May including a joint venture between Larsen & Toubro (L&T) and Nuclear Power Corporation of India (NPCIL) and another belonging to the Yash Birla group, Zenith Birla (India). BIFR deals with problems of industrial sickness in critical sectors where public money is locked up.
In FY15, L&T Special Steel and Heavy Forgings (LTSHF) reported a net loss of R279 crore on the back of R101.9 crore in revenues. The firm’s total debt stood at R1,759 crore in FY15, up 19% over the previous year, while the net worth was a negative R223.4 crore. An official at BIFR confirmed LTSHF had registered with BIFR though the matter is yet to be heard. An email sent to L&T and to NPCIL remained unanswered till the time of going to press.
LTSHF caters to specialised requirements of the nuclear, refinery, petrochemical, power, ship-building and heavy engineering industries and its facility is based in Hazira, Gujarat. While L&T owns 74% in the company, NPCIL owns the remaining 26%.
Sources said that the reason LTSHF had approached BIFR was the lack of business opportunities given there has been little progress in setting up nuclear rectors in India.
The company, sources said, needs close to Rs150-200 crore to be revived.
According to Misha (who goes by only one name), partner, bankruptcy & insolvency, Shardul Amarchand Mangaldas & Co, the BIFR will appoint an operating agency — headed in all likelihood by the lead banker of the consortium — to coordinate with creditors and come up with a scheme of revival. “It would then look at
various options like a one-time settlement, extended repayment period of loans, merger or demerger,” she said.
Zenith Birla India (ZBIL), the flagship company of the Yash Birla Group, is a manufacturer and exporter of steel pipes, tubes and hollow sections. In FY15, its income fell to Rs74.89 crore from Rs159.45 crore in the previous year. In its annual report, the company attributed the fall in revenues to working capital constraints following the withdrawal of credit facilities by banks.
The company reported a loss of Rs72.67 crore in FY15 versus a loss of Rs199.79 crore in FY14. ZBIL, which has been defaulting in bank loan repayments since August 2012, had an outstanding debt of Rs274 crore as on March 2015 and its net worth was fully eroded. An email sent to ZBIL seeking comments did not elicit any response.
Misha explained the revival scheme will need to be approved by the creditors and then taken up by the BIFR. “It takes quite some time for a revival plan to materialise and there have been instances where the decision making has been in limbo for as long as five to seven years,” she added.