Kouton Retail, an apparel retailing chain, said its promoters have pledged additional shares with a local lender to make up for a shortfall in the value of the collateral.
Kouton promoters, including Bhupinder Singh Sawhney, Davinder Pal Singh Kohli and Gurmeet Singh Sawhney, pledged an additional 607,000 or 1.99 per cent shares, of the company with Crossborder Investment India Pvt, a unit of Edelweiss Capital to cover the shortfall in the value of shares pledged earlier.
The founders of the company borrowed Rs 27 crore from Edelweiss between February and October 2008. They originally pledged 15,54,000 shares of Kouton Retail as security for a loan of Rs 10 crore each. The original pledge was created with ECL Finance, a unit of Edelweiss which than transferred to loans to another unit of the financier, Crossborder Investments.
“We had pledged shares at Rs 580 in the month of February, but as the value of the shares of our company came down, we had to increase the number of pledged shares from 15,54,000 to 17,17,000,” said, DPS Kohli, Chairman, Kouton Retail India. The promoters have now pledged as much as 5.6 per cent of their holdings compared with 3.6 per cent earlier. The promoters now have to repay the loan by February, which the chairman said he was confident of repaying. “The payment of the loan is due in the first week of March and we would be able to pay it back as we have earned enough interest through our investments made in real estate” said Kohli without giving more details.
Analysts tracking the company are also hopeful that the company will be able to repay the loan and redeem the pledged shares. "The company should be able to pay back Rs 27 crore as it is expected to earn revenue of over Rs 1000 crore this financial year," said a Mumbai based equity analyst.
The company has a debt of nearly Rs 500 crore in the form of bank loans and non-convertible debentures. Of the total debt Rs 100 crore is in the form of non-convertible debenture. "We are not worried about the repayment as it is long term and we are confident of paying it back,’’ Kohli said. The average cost of debt is between 12 and 13 per cent.
Kouton admitted that it may fall short of its Rs 1,200 crore revenue target for the fiscal year ending March 31, 2009 as demand for lifestyle products and apparels shrink.
“Sales in the last two quarters were not as expected. Even though our revenue will grow substantially we may fall short of out target by 10 per cent,” Kohli said. Kouton has 1,442 stores across India and plans to increase the number of stores to 1,560 by the end of this fiscal year.
The company had posted a net revenue of Rs 793 crore in the year ended 2008.The company is expanding its retail space by taking basements and first floors of the buildings on lease. "Rentals drop by 30-50 per cent if we open our stores in basements or first floors", Kohli added.
