Thursday, January 21, 2016

Banks take control of debt-ridden Alok Industries

A joint forum of banks, led by State Bank of India, has decided to convert the loans extended to the integrated textile company Alok Industries into a 65 per cent stake by invoking the strategic debt restructuring option.

The company will issue fresh equity shares worth about Rs.2,558 crore by March as the banks convert their debt into equity, wielding the loan-recovery weapon the RBI has armed them with.

As of the September quarter, the company’s total standalone debt was Rs.12,642 crore.

One of the largest exporters of home textiles, Alok Industries has been in trouble the past few years as it ventured into retailing and building brands in the domestic and international markets with the launch of H&A retail outlets to sell home textiles and readymade garments. However, with debt piling up and intense competition in the domestic market, it decided to exit the retail venture and focus on the export market.

The company’s board of directors will meet on Thursday to take stock of the development and chalk out the course of action. It will also convene an extraordinary general meeting to increase the share capital of the company to Rs.4,000 crore from Rs.1,500 crore, a company statement said on Wednesday.

SDR norms

Under the SDR regulations laid down by the Reserve Bank of India, banks can convert a part of their debt for a majority stake in a defaulting company and find a suitor within 18 months. Once the SDR option is invoked, the debt exposure to the defaulting company will not attract higher provisioning for 18 months.

In the September quarter, the company registered standalone loss of Rs.242 crore against net profit of Rs.45 crore in the same period last year. Net sales during the quarter fell 15 per cent to Rs.3,168 crore (from Rs.3,745 crore).

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