“Bulge-bracket private equity funds TPG Capital Management and KKR & Co LP are competing with domestic textile companies Vardhman Group, Trident and a brand new special situations joint venture between Ajay Piramal Group and Brescon to take control of debt-ridden Alok Industries, one of India’s largest exporters of home textiles,” says a media report quoting unnamed sources.
Vardhman Textiles told CNBC-TV18 that it has shown interest in buying some spinning assets of Alok Industries but not looking to buy polyester business. It feels banks will have to take a massive haircut.
As per RBI rules, banks have right to take control of company that failed to pay loans for a long time and hand over operations to other company or a group of people that are able to improve performance of the company over a time.
A joint forum of 25 banks led by State Bank of India that together have an exposure of around Rs 13,000 crore in the company, decided in January to convert loans extended to Alok Industries into a 65 percent equity stake by invoking the strategic debt restructuring (SDR) option. Banks decided conversion of debt into equity at their Joint Lenders Forum meeting held on November 23 and December 12 (2015).
“At JLF meeting on January 16, it was decided that JLF would be acquiring upto 65 percent stake in the company by converting debt amounting to Rs 2,557.87 crore into 255.78 crore equity shares of Rs 10 each,” the textile company said on March 1.
State Bank of India will get maximum portion of preferential equity capital (13.04 percent out of 65 percent) after conversion of debt into equity, followed by Axis Bank (5 percent) and Central Bank of India (3.42 percent). In total, 32 banks will get preferential equity capital of the company.
Alok had called an extraordinary general meeting, on March 14, to consider conversion of debt into equity shares along with alteration in capital clause of articles of association and increase in authorised capital of the company.
Owing to scarcity of working capital and consequent impact on operations, the company had not been able to perform operations at optimal levels, leading to decline in operating profits and liquidity in company and consequently its account had slipped into SMA2 category (where principal or interest payment overdue between 61-90 days) with most banks.
As per latest quarterly earnings (December 2015), the company’s loss increased significantly to Rs 1,638.3 crore from Rs 227.35 crore in preceding quarter. Revenue in same period increased marginally to Rs 3,294.6 crore from Rs 3,209.8 crore. For nine months ended December 2015, its loss stood at Rs 1,870.8 crore.
Promoters currently hold 37.17 percent stake in the company that has presence in cotton and polyester segments.
At 10:44 hours IST, the scrip of Alok Industries was quoting at Rs 4.22, up Rs 0.17, or 4.20 percent on the BSE.