Shirdi Ind gets NCLT breather, can run biz without inviting takeover bids

Company says its case is different from other companies referred to NCLT as restructuring of loan was okayed by lenders before ordinance was passed for Insolvency and Bankruptcy Code

In the first verdict of its kind, the National Company Law Tribunal (NCLT) has granted permission to the management of Asis brand plywood and furniture maker Shirdi Industries to run its business without inviting bid for its takeover.

Normally, NCLT seeks bids for the insolvent company from potential acquirers under the Insolvency and Bankruptcy Code to recover the loan amount from the borrower. In the case of Shirdi Industries, however, NCLT has ordered the existing management of the company to run day-to-day business operations and has asked lenders to resolve the issue.

“We are the first company in which the existing management has been ordered to run the operations and resolve the loan issue. In fact, our case is different from other companies referred to NCLT. In fact, our case was referred to the NCLT and restructuring of loan was approved by lenders before the ordinance was passed for Insolvency and Bankruptcy Code in November 2017. Hence, the guidelines under the Code are not applicable for us,” said R K Agarwal, Managing Director, Shirdi Industries.

The Asis brand plywood and wooden furniture maker had a total debt on its book to the tune of Rs four billion towards the end of Financial 2013 which, after the interest was applied on it, shot up to Rs 6.5 billion by the end of the financial year 2017. While JM Financial shares 82 per cent of the loan, Edelweiss contributes the remaining of 18 per cent.

Meanwhile, the company claims that its lenders have restructured 80 per cent of its debt with a substantial hair cut and hopes to get the remaining loan also restructured soon. Of the remaining debt, therefore, Shirdi Industries has repaid a sum of Rs 250 million to lenders and is also in the process of retiring its debt as soon as possible.

“To expedite its debt retirement process, we plan to infuse a fresh working capital (capex) of Rs 550 million to utilise 100 per cent of our installed capacity and also set up new lines of business with high margins. The entire capex plan, however, is proposed to be funded through a mix of internal accruals and debt. We are yet to approach lenders,” said Agarwal.

The company’s EBIDTA of Rs 60 million for the financial year 2015-16 has surged to Rs 170 million for FY 2016-17 and is now expected to touch Rs 260 million for the FY 2017-18.