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Lenders to begin insolvency action at Alok Industries

Joint lenders forum approved SBI's move to file the application

Abhijit Lele  |  Mumbai 

bankruptcy, insolvency
Firm created huge capacities via debt funding to cater to global demand, but with slowdown in international markets, was hit badly.

Lenders to on Wednesday decided to start proceedings for the textile firm, by moving an application before the National Company Law Tribunal (NCLT).

The joint lenders forum approved a move of the State Bank of India (SBI) to file the application under the and Code. This follows the Reserve Bank of India’s directive to lenders to initiate corporate resolution process (CIRP) against the company, a senior executive with a financial institution said.

The textile company reported a consolidated loss of Rs 3,071 crore on an income of Rs 8,919 crore in 2016-17. It had booked a loss of Rs 4,367 crore on revenue of Rs 12,929 crore in 2015-16.

The company created large capacities through debt funding to cater to global demand, but with slowdown in international markets, it was hit badly. This capacity creation was accompanied by a large accumulation of debt. Now, it faces a mismatch in timing of cash inflows and outflows, creating severe financial stress.

The company, in its 2015-16 annual report, listed factors such as demand slump, investment calls going wrong and fluctuations in foreign exchange as key reasons for its poor performance.   

Its investments in retail, both in India and the UK, did not pan out as expected. While it closed operations in India, the UK business is still burning cash. The diversification into real estate, although intrinsically value creating, failed to give any asset appreciation and essentially locked up large capital.

Lenders began meetings on Monday to initiate proceedings against 12 stressed accounts identified by the central bank. Besides Alok Industries, the accounts identified by the include Amtek Auto, Bhushan Steel, and

The list also includes Monnet Ispat, Electrosteel Steels, Era Infra, Infratech, Lanco Infratech, ABG Shipyard and Jyoti Structures as defaulting borrowers.

These 12 accounts referred to by the have debt of more than Rs 5,000 crore each, with 60 per cent or more classified as bad loans by banks as of March 2016.

Bankers are also working on short-listing resolution professionals whose names would be proposed to the at the time of filing cases.

First Published: Thu, June 22 2017. 02:13 IST
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