A decision on the R12,000-crore loan recast for the loss-making Pipavav Defence and Offshore Engineering was deferred on Monday with the corporate debt restructuring (CDR) cell expected to meet again soon. Last week, Reliance Infrastructure (R-Infra) announced it would acquire an initial 18% stake in the beleaguered firm which caters for the defence sector.
While the restructuring package for Pipavav was earlier pegged at R7,500 crore, the amount it owes banks, persons familiar with the proposal said the company has sought additional assistance to the tune of R3,500-4,500 crore. Although the CDR cell could not get the necessary approvals of lenders at the meeting held on Monday, sources say the requisite nods from banks’ board were expected to be in place by the next meeting.
A banker present at the CDR cell meeting confirmed to FE the loan recast has not yet received sufficient support from the consortium of lenders led by IDBI Bank. “Around 50% of CDR lenders by value have approved the recast,” the banker explained. For the loan recast to go through, at least 75% of the bankers by value and 60% of bankers by number must be in favour.
Pipavav, which is struggling to win orders, reported a massive net debt burden of R5,481 crore at the end of March 2014. In the three months to December, the company reported a loss of 70.2 crore on revenues of R252 crore. In FY14, the firm had a turnover of R2,534 crore and a net profit of just R2.72 crore.
R-Infra, the infrastructure arm of the ADAG Group, announced last Wednesday it was acquiring an initial 18% stake in Pipavav Defence from the promoters led by the Nikhil Gandhi family at Rs 63 per share, valuing the stake at Rs 819 crore.
The approval of the lenders will be key for the two companies to successfully complete the deal and as part of the restructuring exercise, the promoters must infuse some equity into the company.
The ADAG Group did not specify how it intends to fund the deal. R-Infra had a turnover of Rs 19,034 crore in FY14 and a net profit of Rs 1,914 crore. Its net debt in the last fiscal stood at Rs 19,486 crore and the company has cash and cash equivalents to the tune of Rs 4,802 crore.
R-Infra eventually seeks to acquire the company with an at least 25.10% stake that could cost it as much as Rs 2,082 crore. In a statement, R-Infra had said that it would follow up the initial 18% stake purchase with an open offer to acquire another 26% from shareholders at a value of Rs 66 per share. If the open offer fails or is only partially subscribed, R-Infra will acquire additional shares of the company from the promoters so as to ensure that its holding in Pipavav is at least 25.1%. Automaker Mahindra & Mahindra and Hero MotoCorp were reported to be interested in acquiring Pipavav.