Shree Ganesh Jewellery House (I) Ltd has approached State Bank of India (SBI) for referring its debt to the corporate debt restructuring (CDR) cell. SBI is the lead bank in a consortium of its lenders. Huge losses in import and export transitions have led the company to opt for the CDR route. SBI had a meeting with the other members of the consortium on Friday to discuss Shree Ganesh’s proposal. The outcome of the meeting was not available till evening.

Under CDR, banks typically increase the repayment period of loans to stressed borrowers, offer a moratorium and reduce lending rates.

Export credit Export Credit Guarantee Corp of India Ltd, which provides export credit insurance facilities to exporters and banks, has a substantial exposure linked to certain overseas transactions of Shree Ganesh, according to sources.

As on March 31, 2013, the company’s long-term borrowings were at Rs 100.4 crore and short-term debt at Rs 496.84 crore. The interest coverage ratio in 2012-13 was 2.26.

Shree Ganesh reported a net loss of Rs 1,047.74 crore in the July-September quarter this fiscal against a profit of Rs 82.57 crore in the corresponding quarter last fiscal.

The company incurred a loss of Rs 396.2 crore in certain trade transactions.

The company also disclosed that it cancelled a bullion purchase contract in October with Shree Ganesh Jewellery House FZE, a wholly-owned subsidiary in the United Arab Emirates.

“As such, the subsidiary had suffered a loss of around Rs 1,137 crore, of which Rs 61.75 crore is to be provided in standalone books as a diminution in value of investment, and Rs 623.72 crore has been provided against bad debt, since the subsidiary is also one of the debtors of the company,” Shree Ganesh stated.

According to the management, nearly 81 per cent of the company’s revenue was derived from exports in 2012-13 and 98 per cent of its raw materials were imported, creating a hedge. Since exports exceeded imports, a weakening rupee tended to benefit the company’s margins. Early last month, rating agency CARE had suspended the ratings assigned to bank facilities and instruments of the company.

Dubai subsidiary During the second quarter of FY12, the company had entered into a gold purchase agreement through its Dubai subsidiary Shree Ganesh FZE, a Shree Ganesh spokesperson told Business Line. . However, “ambiguity” in regulatory policies led the company to unwind the contract, which led to a loss during the current year, the spokesperson said. “To fund the loss resulting from gold purchase contract, Shree Ganesh requested debtors for goods on credit. SGJ offered to sell the products through a mix of cash payment and credit terms for a longer period,” the company added.

The Shree Ganesh stock on Friday closed up 4.95 per cent on the BSE at Rs 24.4 on expectation of a better direction of the company’s finances.

>jayanta.mallick@thehindu.co.in

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