Cash-strapped apparel retailer Provogue (India) has shut more than 60 stores in the last one year and is delaying salaries of employees. The promoters of the company are under serious trouble as lenders are contemplating to invoke powers under strategic debt restructuring (SDR) provisions, according to sources.
Provogue has a total stand-alone debt of around R305.9 crore. In the December quarter, the company reported a net loss of R49.73 crore, on net sales of R82.65crore. For the last couple of years the company has been consistently reporting losses almost in every quarter.
“Our main lender is Andhra Bank and it is true that they are trying to bring in new management under SDR. We are negotiating with them on the same and the final decision is expected by first week of April. We are trying to get our debt restructured and have requested the banks to support us,” managing director, Nikhil Chaturvedi, Provogue told FE.
Under SDR, banks have the power to convert a part of a defaulting firm’s debt to majority equity and take operational control. Once the decision to invoke SDR is taken, banks will have about 18 months time to find buyers for this equity.
Andhra Bank officials were not available for comments.
Chaturvedi said the company is continuing with store rationalisation and plans to shut few more loss making stores across the country. He declined to give further details as the matter is yet to be settled with the banks.
In the last one year the company has rationalised store count and has only 3 stores operational in Mumbai and around 40 stores operational in the country. The company was operating more than 100 stores across the country in 2014 of which only 40 stores are operational at present.
According to sources the company is delaying salaries of employees by around 2 to 3 months. Also the company is no longer sending fresh stock to its stores and is selling stocks at around 30% to 50% discount on most items.
In Mumbai there are around 8 employees and their salaries would amount to around Rs 1.5 lakh per month. The company has around 55 to 60 employees pan-India, a senior official of the company said.
Provogue is not the only debt-ridden retailer going through SDR, most of the brick and mortar retailers have witnessed a challenging time over the last few years due to economic slow down. To add to the woos steep competition from online retailers has washed away their wafer thin margins.