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BM Khaitan group sells foreign assets as high debt pinches

Tuesday, 27 May 2014 - 6:15am IST | Place: Kolkata | Agency: dna

In a move to reduce increasing debt level, BM Khaitan group-controlled McNally Bharat Engineering has exited its holding in MBE Coal & Minerals Technology, a Cologne (Germany)-based coal and mineral processing manufacturing business to an undisclosed buyer.

With this, McNally Bharat has exited from two more overseas acquisitions since January -- Humboldt Wedag's coal and mineral operations made in 2009, and then majority stake in Specialist Energy Group, the UK-based maker of pumps and motors done in 2012.

These assets and businesses were acquired cheap by the company during the global economic slowdown that hit Europe hard. But after painstakingly restructuring the operations of both the businesses, McNally Bharat slowly accumulated huge debt on its books, which forced the company to dispose off its holdings in these overseas firms.

"As a part of the ongoing consolidation exercise, the company's 100% subsidiary in Singapore has sold 90% of its holding in its manufacturing subsidiary based in Cologne Germany (MBE Coal & Minerals Technology GmbH), at a consideration of euro 1.5 million (around Rs 12 crore)," McNally said in a filing with the exchanges.

Khaitans picked up the Cologne assets for a higher price of euro 2.03 billion.

"This investment has already been written off in the books of the Singapore subsidiary in FY'12-13, hence this transaction shall reflect a profit on of euro 1.5 million in the consolidated account in FY'14-15," McNally said.

The transaction would also reduce the debt burden to the extent of euro 3.9 million or Rs 31 crore in the consolidated accounts, it said.

Reduction in debt, which stood close to Rs 900 crore as on December end, has been McNally's chief concern.

Its ratings for long term and short term debts were downgraded by a notch by CARE in September.

"Decrease in net profit margin, significant increase in debt level and elongation of the extended collection period along with high exposure to group and associate companies with net losses on consolidated basis" were some of the reasons for the downgrade.

In January, McNally sold off its 41.69% stake in UK company, rechristened as Hayward Tyler to a clutch of investors for £12.3 million or about Rs 127 crore.

The sale yielded a tax free profit in Singapore subsidiary of $2.5 million, which helped McNally reduce overall borrowing by Rs 140 crore.

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