McNally Bharat Engineering Co Ltd, the Khaitan-family promoted EPC firm, is expecting debt restructuring plans to be cleared by “the second half of this fiscal”.
Restructuring is “extremely crucial” for the company to get back on “a sustainable growth path”, the Annual Report for FY21 said.
McNally Bharat has already been categorised as a non-performing asset by lender banks. “The debt restructuring plan progressed with support of our lenders and we are at the verge of getting it approved by the second quarter of this financial year. Debt restructuring is extremely crucial for your company to get back on the sustainable growth path,” Chairman, Aditya Khaitan, said while addressing shareholders.
In a note, the management stated, “Lenders……have appointed/would be appointing various agencies to evaluate the resolution plan as decided in the last consortium meeting held on 24th June 2021.”
The management, in the annual report, said it is strategising to restructure overall debt “by seeking cooperation from financially sound investors/business houses”.
McNally Bharat owes close to ₹2,000 crore to a clutch of banks. Its bankers include Bank of India, SBI, IDBI Bank, Axis Bank, ICICI, Karur Vysya, PNB, Standard Chartered, Union Bank, UCO Bank, Bank of Baroda, Canara Bank, DCB Bank and DBS Bank.
The auditors have listed out default details across loans and borrowing covering external commercial borrowings, working capital demand and cash credit.
The company also defaulted in payment of interest amounting to ₹316 crore (approximately) on borrowings for FY21, and has “not recognised interest expense” of ₹290 crore. “The total comprehensive loss for the year (FY21) is understated to that extent,” it said.
The management clarified, “majority of the lender banks have stopped debiting interest on their outstanding debts” (as it was an NPA).
In FY21, standalone revenue from operations stood at ₹ 358 crore and it had a loss of ₹ 50 crore.
“Industrial slowdown accompanied by banking restrictions on liquidity management adversely impacted business and profitability,” apart from impact of the pandemic, working capital constraints and external factors.
In FY21, McNally won orders to the tune of ₹ 1,192 crore through joint ventures (JVs). Despite auditors raising questions on the company being a “going concern”, the management, in its business outlook, said it was initiating steps to have joint venture partners from overseas where it can become a domestic partner for execution of the project.
It is pursuing JVs in Europe and the Middle East for “aggressively executing projects” in the areas of smart cities, social sector buildings, renewable power, water management and infrastructure.
“The company is planning to use core competence in mines and mineralogy, solar power, material handling and providing engineering and project management services in the Middle East, Europe and Africa particularly in ferrous and non-ferrous metals and gypsum, fluorspar, rock phosphate, graphite, etc,” the annual report adds.
For domestic projects, the company is looking to secure shorter duration ones and “faster turnover of its resources”.