Banks allege fund diversion to real estate from its core activity of textiles, scout for investor for non-cotton business; 25 lenders have Rs 13,000 crore exposure to the company
Bankers have alleged that Alok Industries diverted money to real estate investment from its core business activity -- textiles.
Led by State Bank of India (SBI), the lenders are now planning to restructure the company by separating the cotton and non-cotton units.
After this, the banks would scout for a strategic investor for the non-cotton business of the company.
The company said in a response to an email query by dna, "We currently have an embargo on media interaction and hence cannot comment on anything. We will expect you to take due caution however to ensure that the story contains no distorted facts."
Bankers said high value real estate purchases and exits from these investments at a loss resulted in the stress in repayments. Instead of using it for the core textile business, the company diverted money for real estate investments in Mumbai and Silvassa. Over 25 lenders have total outstanding dues of over Rs 13,000 crore.
The company, which had bought office space in Peninsular Business Park building in Mumbai in 2007, had subsequently sold it at a loss. A land parcel in Silvassa, the capital of Dadra and Nagar Haveli, which it had acquired earlier, was also sold at a loss.
Last week, Alok Industries informed the stock exchange,"The company has been informed by its lead bank, State Bank of India (SBI)...vide their letter dated 18 January 2016 that as decided by the joint lenders' forum (JLF) at their meetings held on November 23, 2015 and December 11, 2015, strategic debt restructuring (SDR) has been invoked on the company with the reference date being November 27." Under the SDR norms laid down by the
Reserve Bank of India, banks can convert part of their debt into majority equity in a firm which has defaulted on its payments.
In the September quarter, the company reported standalone net loss of Rs.242.20 crore compared with a net profit of Rs 45.36 crore in the same quarter a year ago. Net sales for the quarter were Rs.3,167.91 crore, down 15.4% from Rs.3,744.84 crore a year ago. The company is promoted by Ashok B Jiwrajka (2.54%) who heads it as executive director, managing director Dilip B Jiwrajka (2.5%), joint managing director Surendra B Jiwrajka (2.6%) and Alok Knit Exports (27.79%).
So far, banks have invoked SDRs in 15 loan accounts where the total loans stand at about Rs 83,100 crore, Religare Institutional Research estimated in a January 4 report. Religare analysts expect another Rs 63,900 crore worth of loans to enter the SDR process in the next 12-24 months.
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