Textile firm late on repayment by 60 days, gets more funds
Alok Industries, which has delayed servicing its loans by more than 60 days after the due date, has been given an additional line of credit of R2,000 crore with a two-year moratorium, three bankers close to the development told FE. The company owes banks a staggering R18,000 crore and the account has been classified SMA2; the decision to loan the company more money was taken at a joint lenders forum (JLF), bankers familiar with the discussions told FE.
The bankers said the additional funds were being given to help the company out of a ‘temporary liquidity shortage’. A document accessed by FE lists 18 lenders — including institutions such as Life Insurance Corporation of India and IFCI — sanctioning financial assistance; working capital limits by banks have been enhanced by R1,460.9 crore to R5,255.76 crore.
Even by the end of September, 2013, Alok Industries had piled up a whopping total debt of R20,012 crore which put the firm’s debt equity ratio at an uncomfortable 5.72. It reported an operating profit of R855.88 crore in Q3FY15, paying R599.13 crore as interest and posting a net profit of R25.9 crore, a sharp fall of 90% over the net profit of R239.8 crore reported in three months to December 2012. No comparable numbers are available for the December 2013 quarter.
For the 18-month period ended FY13, Alok posted a net profit of R296.7 crore on net sales of R21,388 crore. The company last declared its annual numbers in its FY13 results, spanning 18 months ended September 2013.
Banks also said the consortium opted for a ‘rectification’ of the asset as opposed to a restructuring or recovery, leaving it a standard loan. While an asset restructured after March 31, 2015, would have required the banks to classify the account a non-performing asset (NPA) and make higher provisions of 15%, the Reserve Bank of India (RBI) has allowed any restructuring initiated before April 1 to be classified a ‘restructured standard’ asset and provided for at 5%.
SBI leads the working capital consortium while IDBI Bank heads the term-loan consortium; 33 lenders have an exposure to the account.
Alok Industries CFO Sunil Khandelwal excused himself from commenting on the grounds that the company was in the silent period and not interacting with the media.
On October 1, 2014, Alok Industries had informed the exchanges that SBI had sanctioned an export performance bank guarantee (EPBG) of $1,633.33 million, or Rs 9,800 crore. “The export advance amount so availed will be utilised to repay domestic high cost debt. We expect the above strategy to yield us interest cost savings of at least 6% on domestic debt replaced,” the company had said in the letter. Under an EPBG, banks will provide guarantee to a company’s exports, against which the customer will pay an advance. The advance will then be utilised to reduce the company’s term loans.
“The textile industry, especially the spinning segment, has been adversely affacted by a slowdown in demand from top buyer China, while garment exporters have been facing problems due to the economic crisis in Europe. The economic woes of the EU have also hurt our spinning industry indirectly, as countries like Bangladesh, who buy yarn from India to manufacture garments for exports to the EU, have cut down on purchases from us. What compounds the problems for the entire sector is that while competitors like Pakistan and Bangladesh have unrestricted access to the EU, which also accounts for around 35% of India’s garment exports, Indian yarn, fabrics and made-ups & garments attract export duties of 4%, 5% and 12%, respectively, there. Still, neither the Budget 2015-16 nor the foreign trade policy for 2015-20 offered any special incentives to boost the sector,” said DK Nair, secretary-general of the Confederation Of The Indian Textile Industry (CITI).