The Hindu Business Line : Butterfly on turnaround path; debt revamp is new chant

THE Chennai-based Gandhimathi Appliances Ltd, owners of the `Butterfly' brand, has roped in Meghraj Financial Services for its debt-restructuring programme.

Talking to Business Line, Mr Pankaj Wadhawan, Vice-President and Head, Debt Restructuring Group, Meghraj Financial Services, said the mandate from Gandhimathi is to drastically reduce the average interest rate from the current levels of 17-18 per cent to 11 per cent a year.

"A beginning has been made with IDBI, the lead lender, and the Industrial Investment Bank of India agreeing to a waiver of Rs 7 crore from the outstanding debt of Gandhimathi on the grounds of it being unsustainable. Hopefully, similar steps will be taken by the other lenders to reduce the cost of funds. We have also managed to get an additional working capital of Rs 4 crore for the year. Clearly, this is a mid-cap company on the turnaround track," Mr Wadhawan said.

The results are evident as a loss of Rs 3.79 crore in 2004-05, much lower than that of Rs 11.87 crore the previous year, has got revised to a net profit of Rs 1.7 crore on the strength of a one-time financial charge waiver of Rs 5.05 crore. True, it is only a marginal difference as accumulated losses of Rs 12.95 crore as on March 31, 2004, came down to Rs 11.25 crore a year later.

Mr V. M. Lakshminarayanan, Chairman, Gandhimathi Appliances, admitted that the group was going through a financial restructuring process. The worst was over and the group was on the turnaround path, he said, citing the delay in getting working capital to be a major hurdle in the company's performance.

"The worst is behind us as far as financial problems are concerned and this is reflected in the Rs 30-crore sales in the current fiscal, up almost 30 per cent from Rs 21 crore last year. Evidently, more working capital is once gain being made available to us by the lending institutions. We can safely target Rs 45-50 crore for 2006-07," Mr Lakshminarayanan said.

Gandhimathi Aplliances, at its manufacturing plant at Chennai, has installed capacities of 1,80,000 LPG stoves, 1,80,000 mixer grinders and 48,000 tabletop wet grinders a year. Now, the plan is to go for washing machines, air-conditioner compressors and portable food processors.

IDBI and IIBI, along with the three other lenders — State Bank of Travancore, South Indian Bank and Bank of Baroda — have a total exposure of Rs 30 crore in the company. With debt beginning to dip and more working capital on the anvil, newer versions of the Butterfly brand, both in the domestic and overseas markets, may be just around the corner. The company's share closed on the BSE last Friday at Rs 6.80, up marginally from the previous close of Rs 6.40.

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