EMC has an unpaid debt level of Rs 6,309 crore with SBI having the highest exposure of Rs 1,675 crore among the members of a consortium of 24 lenders
More than Rs 6,000 crore worth of loans are at risk, including State Bank of India's (SBI's) Rs 1,675 crore, with leading power infrastructure company EMC going the insolvency way.
The debt resolution of the entity, which had a significant global presence, might face delays as the company owned by the Toshniwal family is undergoing a forensic audit.
EMC was earlier in the news when it was roped in as a strategic investor to rescue the Khaitan family- owned McNally Bharat Engineering but the deal was later called off in 2016.
Given the current state of affairs in the power and engineering sectors, both the companies are now facing hardships with questions now being raised over their survival.
As per claims filed by the financial institutions and other creditors, the Kolkata-based EMC has an unpaid debt level of Rs 6,309 crore with State Bank of India having the highest exposure of Rs 1,675 crore among the members of a consortium of 24 banks and financial institutions.
EMC is one of the earliest entrants in the power infrastructure sector and forayed into overseas markets way back in the 1970s by exporting transmission towers, conductors and other hardware items, and also taking up turnkey projects in Europe, Africa and the Middle East.
In fact, when the Khaitans were desperately looking at ways to revive their ailing McNally Bharat Engineering, they inked a deal to rope in EMC as a strategic investor and merge the companies, thus using its strength and contacts to pump in equity and bring in new businesses.
As per the deal between the Khaitans and the Toshniwals, EMC bought 12.32% stake in McNally Bharat in 2015 followed by a deal to acquire an additional 19.77% stake.
The pact, however, was called off in 2016 because of the failure of both the groups to find enough synergy or benefit in their merger of the businesses.
Till 2015-16, EMC continued its strong presence in the power sector, winning transmission projects in countries like Georgia, Tanzania, and also acquiring a company in Spain call Regya that specialised in power projects.
EMC's fortunes started dwindling in FY17 with the change in the power sector dynamics and rise in its receivables, industry insiders say.
The problem was aggravated following its exposure to McNally Bharat.
"During FY16, EMC invested in McNally Bharat Engineering, a bigger loss-making company. The investment had to be funded through additional borrowings of Rs 143 crore. The higher debt level was incurred during a time when management's time was divided between the existing and the newly acquired business leading to weak monitoring of cash flows and considerable irregularities in servicing the debt," India Ratings said while downgrading the company to default grade in March 2017.
TRIPPING POINT
- EMC has an unpaid debt level of Rs 6,309 crore with SBI having the highest exposure of Rs 1,675 crore among the members of a consortium of 24 lenders
- The company’s fortunes started dwindling in financial year 2016-17 with the change in the power sector dynamics and rise in its receivables
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