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Power transmission components manufacturer, Easun Reyrolle, has wound up in the insolvency courts.
Following the expiry of the deadline for submitting bids against a public notice calling for bids, the Resolution Professional, Benegal Parameshwara Udpa, will call for a meeting of the Committee of Creditors to take the issue further.
State Bank of India claims Easun Reyrolle owes it Rs 205 crore; Canara Bank claims another Rs 59.31 crore. While these two banks have proceeded against the company at the National Company Law Tribunal (NCLT), it is understood that a few other banks are owed moneys.
For the year 2018-19, the last year for which full-year financial results have been announced, the company achieved a turnover of Rs 88 crore (consolidated) and a reported a net loss of Rs 10 crore.
When contacted, Easun Reyrolle’s Managing Director, Raj Easwaran said he did not wish to make a comment. However, going by the company’s submission to the courts and its statements in the annual report for 2018-19, the company believes that its woes are due to the what it is owed by government companies, mainly the various state electricity distribution companies.
In its annual report, it notes its working capital cycle was severely affected by “slow collection from the Government sector undertakings.”
While the NCLT judgement (dated May 5) ordering corporate insolvency resolution proceedings against Easun Reyrolle notes that discoms owe the company Rs 103 crore, the company’s annual report for 2018-19 shows Rs 168.58 crore as ‘trade receivables’, of which Rs 136 crore were due for over a month.
The high overdues, from government-owned entities, resulted in “cash crunch and liquidity issues”.
Discoms owe electricity suppliers Rs 97,000 crore and are unable to pay, partly because while they are forced to supply power to farmers and poor sections of the society at zero or subsidized rates, they have not been getting the subsidy reimbursements from the state governments. State governments’ total subsidy dues to discoms are around Rs 54,000 crore. On top of that, the dues—in terms of unpaid bills— of state government departments are another Rs 60,000 crore. As a result of this, discoms have to borrow more from the market for their operations and are sitting on a Rs 2.5 lakh crore of debt, taking the annual interest burden on their heads. This situation has resulted in many companies, such as Easun Reyrolle—that supply to discoms (power, equipment and other services) pushed into bankruptcy.
Easun Reyrolle was incorporated in 1974 and commenced production at its plant in Hosur in 1980. The company was promoted by the late Mr. K Easwaran, Mr. Hari Easwaran and associates, with equity participation of 25 per cent from Reyrolle Parsons - a wholly owned subsidiary of Rolls Royce Engineering, UK. However, Reyrolle Parsons was later acquired by VA TECH, Austria, which was in-turn acquired by Siemens. Consequent to the takeover of VA TECH by Siemens, Reyrolle Parsons disinvested its equity in ERL in June 2007.
In the past few years, Easun Reyrolle acquired a clutch ‘technology companies’ -- NxtPhase T&D Corporation, Canada and 60 per cent stake in Switchcraft Group LLC, USA. It also set up a wholly owned investment arm (ERL International Pte Ltd) in Singapore and an international marketing arm (ERL Marketing International FZE) in Sharjah.
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