Corporate Debt Restructuring (CDR) Empowered Group, the apex authority in CDR system, has approved Eastern Silk Industries Ltd's debt restructuring proposal.
The Allahabad Bank-led nine-member consortium early this month communicated the restructured package of debts under the CDR mechanism, which will be effective from April 1, 2011. Mr S.S. Shah, Chairman of the company, told Business Line that “the restructuring would cause positive cash flow for the company and improve the balance sheet position.”
The company's total bank loan stands around Rs 430 crore, of which Rs 52 crore is long-term borrowing.
The repayment of this long-term loan was to complete in 2014-15. Now, after restructuring, it will be extended till 2020-21. The company chairman said the saving on interest outgo was currently being computed. “It would be ready within a fortnight when the CDR could be formally implemented,” Mr Shah said.
The CDR will require restatement of accounts. During the nine-month period from April 1, 2011 to December 31, 2011, the total interest outgo for Eastern Silk was Rs18.08 crore.
The company reported a net loss of Rs 18.82 crore till December 31 this fiscal against a profit of Rs 88 lakh in the corresponding period last financial year.
Meanwhile, the company during this financial year has already downsized its business by eliminating outsourcing in view of fall in export demand.
Around 90 per cent of Eastern Silk sales come from exports, mainly to developed markets including Europe.
Apart from Allahabad Bank, the other lenders of the consortium included Exim Bank, SBI, Federal Bank, UCO Bank and ICICI Bank.
Rise in cost of inputs, human resources, dip in export orders from the US and Europe and non-realisation of dues from buyers were the primary reasons for the liquidity crisis for Eastern Silk.
The company this year has completely stopped import of yarn from China on cost considerations.
Chinese JV
Incidentally, the promoter group of Eastern Silk has exited a Chinese joint venture for manufacturing yarn.