Deccan Cargo & Express Logistics Pvt Ltd has flown into ‘debt' turbulence. The company, promoted by low-cost air travel pioneer Captain G. R. Gopinath, has been referred to the corporate debt restructuring cell to nurse it back to health.
Axis Bank, State Bank of India and Syndicate Bank want the express transportation and logistics company restructured, as their exposure, aggregating Rs 538 crore, is at stake.
DCEL suffered losses due to frequent changes in strategy (experimenting with different combinations of aircraft); underutilisation of aircraft; inability of franchisees (operating pick up and delivery service) to cover fixed costs as volumes were not up to the mark; and shelving of the Nagpur super-hub project.
The company totted up losses of Rs 318.68 crore in the financial year ending March 31, 2011. This had a dual impact on DCEL — on the one hand, banks did not disburse the already tied up funding, on the other, equity investor Reliance Industries Ltd put all support on hold, said an official with one of the banks.
The major stakeholders in DCEL are: Deccan Emerging Business Ventures Ltd (51.43 per cent); RIL (30.89 per cent) and Captain Gopinath (5.89 per cent).
The debt restructuring entails a moratorium up to March 31, 2013, on the sustainable term loan portion, assessed at Rs 150.54 crore as per the projected business plan. Repayment of the loan will be in 24 quarterly instalments, beginning June 30, 2013, at 8 per cent interest.
The balance loan portion of Rs 387.12 crore will be converted into cumulative redeemable preference shares and equity shares.
The restructuring package will take effect only if the promoters do their part — induct a strategic investor for infusing capital and perhaps write down their own current equity capital. Company officials did not respond to emails and calls for this story.