Vadodara-based engineering firm Jyoti Limited has been declared as a “sick industrial company” by the Board for Industrial and Financial Reconstruction (BIFR) considering the weak financial position of the company. However, the Board has asked the company to submit a rehabilitation scheme in a period of eight weeks. Further, the management finds some breather in the BIFR declaration as it also puts an end to the hostile takeover threat that had been looming over the beleaguered company since early this year.
“The BIFR has directed us to submit a rehabilitation scheme within eight weeks. We will consult our lenders and come out with a draft scheme. Also, the board, in its first order has made it clear that no management change can take place at Jyoti. This comes as a breather for us and puts an end to the takeover threat,” Rahul Amin, chairman and managing director, Jyoti Ltd, told BusinessLine .
Mumbai-based broker Bharat Patel and his associate investors had attempted a hostile takeover bid by removing the existing board of directors and the promoter Amin. The company went into BIFR in 2014 and as Amin claims since then, the company had made serious efforts to improve the books. “Our efforts have started showing signs. In June quarter this year, we had positive EBITDA and we expect the same for September quarter. In next couple of years, we should be able to turnaround the company,” said Amin adding that prolonged delay in payment of receivables from government projects mainly in water and power sector pushed the company into the dark.
“As much as ₹200 crore worth of receivables have been stuck up in government projects. The main challenge that we are facing is the lack of management in infrastructure projects,” he said. Financial experts also see macro-economic factors hurting the financials of the company, which was earlier referred to CDR as well. “The important aspect is that the unit has not been termed as a non-performing asset (NPA). So, the lenders have some room to restructure the debts. Secondly, nobody will be able to file liquidation against the firm. But unless the macro-economic factors improve, it will be a challenging task,” said a noted chartered accountant from Vadodara.
Amin claims that the weakness is across the sector and Jyoti isn’t the isolated case. “We have ₹700 crore worth of orders on hand. But we will execute them slowly so that cash flow shall continue,” said Amin. In its filing with the Bombay Stock Exchange (BSE), the company informed that its board of directors had met on October 7, and “took on record that B.I.F.R., in the hearing held on October 05, 2015 declared Jyoti Ltd as a “Sick Industrial Company” within the meaning of Sick Industrial Companies (Special Provisions) Act, 1985 and appointed the Lead Bank Central Bank of India as the Operating Agency for its further needful action,” a company statement said.