For dry cell battery major Eveready Industries, the amount of outstanding inter-corporate deposits (ICDs) to stressed Williamson Magor group companies remained almost the same for the first and the second quarters.
For dry cell battery major Eveready Industries, the amount of outstanding inter-corporate deposits (ICDs) to stressed Williamson Magor group companies remained almost the same for the first and the second quarters. The battery maker, however, did not make any provision for the outstanding ICDs, amounting to around Rs. 349 crore, during the first half of this fiscal as it believed that the outstanding dues should be recovered because of ongoing promoter group-level restructuring.
Williamson Magor group companies like debt-laden McLeod Russel and McNally Bharat Engineering have continuously been facing severe financial stress. While one of the financial creditors to McLeod has dragged the company to the National Company Law Tribunal (NCLT) after a default on repayment, McNally was able to thwart an insolvency proceedings against it following an out-of-tribunal bilateral settlement with a financial creditor last month.
As Eveready Industries India (EIIL) had extended ICDs to the promoter group companies, rating agencies have raised concerns over the battery major’s high net leverage and weakened liquidity amid financial support extended to group firms.
For the battery maker, the amount of outstanding ICDs during the June and September quarters remained almost the same, the company told the exchanges. Although the borrowing group entities repaid some of the ICDs on demand from time to time, deposits amounting to Rs. 348.16 crore and Rs. 348.79 crore were lying outstanding on a consolidated basis as on June 30 and September 30, 2019, respectively.
Interest outstanding on ICDs grew to Rs. 48.98 crore for the second quarter, from Rs. 38.76 crore in Q1. Moreover, the company furnished certain corporate guarantees and post-dated cheques in favour of banks/other parties who had provided loans to promoter group firms. Outstanding amount of these guarantees/post-dated cheques stood at Rs. 133.46 crore as on September 30, 2019.
“Repayment of these deposits and the guarantees/post-dated cheques given to on behalf of these companies, along with future interest, has been guaranteed by certain promoter directors of the company, in the event of a default by the said companies to pay the dues. Furthermore, a promoter group-level restructuring is under way to monetise assets to meet various liabilities of the companies (part of the promoter group) including the outstanding advances and any potential liability related to the guarantees/post-dated cheques due to the company. The management therefore believes that the outstanding dues shall be recovered and no provision is required at this stage,” Eveready Industries said while announcing its second quarter results.
The company has posted a 27.3% y-o-y fall in its net profit to Rs. 18.11 crore for Q2, from Rs. 24.91 crore a year ago.