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The promoter of Shirdi Industries Rakesh Agarwal has managed to escape the Insolvency and Bankruptcy Code missive by a whisker and successfully retained his company through NCLT proceeding.
The company, which manufactures decorative laminates and MDF (medium density fibre) boards, was doing well till 2010 and filed for IPO to raise ₹120 crore for expansion. With clearance for IPO delayed by over 27 months, the company borrowed from a consortium of eight banks and dipped into reserve for funding expansion.
₹650-crore debt
It accumulated debt of ₹650 crore and started defaulting on payment. Four months after default, banks assigned the loan to asset reconstruction companies — JM Financial and Edelweiss.
In July 2015, the ARCs restructured 82 per cent of the loan with promoters infusing funds, issuance of equity to banks and repayment being made till March 2022.
However, Shirdi Industries was declared sick due to liquidity crunch and SBI was appointed an operating agency to prepare the revival plan.
NCLT lifeline
Last May, NCLT admitted the company’s case and interestingly, the promoters were the only bidder for the company. The Resolution Professional recommended the old revival plan which was approved by the committee of creditors.
Rakesh Agarwal, Director, Shirdi Industries, said the ordinance banning the existing promoters bidding for their company brought some suspense but since it was not with retrospective effect, the revival plan scraped through.
Liquidation value
Against the demand of ₹650 crore made, including interest accrued since 2014, NCLT accepted claim of ₹380 crore and liquidation value was fixed at ₹110 crore.
“We gave a proposal to repay ₹176 crore and additional ₹55 crore extra if our performance is good till March 2022. The lenders will also get 20 per cent equity and promoters will pledge 51 per cent of their holding,” he said.
Of the outstanding operational credit of ₹16 crore, the company will repay 15 per cent and ₹4 crore of PF default between March 2022 and 2024.
On the revival path
The company plans to enhance capacity utilisation at its plant from 60 per cent to 100 per cent in 18 months using internal accruals.
It is putting up additional plywood capacity with investment of ₹15 crore at its existing plant. It has already tied up ₹10 crore and the project is expected to be completed in 18 months.
It will add a topline of ₹100 crore and Ebitda of ₹12 crore.
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