Bombay Rayon Fashions Limited (BRFL) has decided to hive-off its Tarapur Yarn Dying & Fabric Process unit to its subsidiary company - BRFL Textiles Private Limited (BTPL) under a slump-sale transaction as part of a restructuring drive.
Post the Tarapur assets are transferred from BRFL to BTPL, a set of PE investors would infuse equity in BTPL that would be utilised for funding the working capital for ramp up of operations of Tarapur assets. “This unique structure, outside the purview of the NCLT, is beneficial to all the stakeholders of the company and would result in maximisation of value from the Tarapur assets by retaining its ‘Going Concern’ value,” the company said in a statement.
Ongoing market conditions affected the company’s operations after expansion and because of liquidity crisis; dues of the lenders were restructured twice under the aegis of RBI restructuring schemes. However, the schemes did not provide for additional working capital required for ramp up of operations and hence the manufacturing facilities were not utilised optimally. As a result majority of the loans were assigned by the lenders to Asset Reconstruction Company (ARC) that facilitated the lenders exit and start of new chapter of revival.
The new structure ensures majority of the equity in BTPL is held by BRFL and with minimal debt in BTPL.
“The new entity will generate good revenues in excess of ₹2,000 crore annually and will be a perfect model for ‘Make in India’, offering excellent products to replace global competition in Indian as well as international market,” it said.
Following this restructuring, livelihood of more than 5,000 direct employees and 15,000 indirect employees will be ensured. The past salaries and PF/ESIC dues of workers have been cleared in full, which had a history of overdues of ~6-12 months.
The company was not able to make the payment of statutory dues that included MIDC, MSEB and direct and indirect taxes. With this structure, all past statutory dues pertaining to Tarapur assets are cleared in full with full certainty of regular payment going forward.
“ BRFL being a majority shareholder in BTPL and the operations of BTPL ensured at optimal level by funding the working capital, will result in regular stream of cash inflows to BRFL, which would in turn be utilised towards servicing of BRFL debt which has been persistence NPA since 2013,” the company said.