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| Vishal Retail plans to restructure Rs 730 cr debt by June |
| Neeraj Thakur / New Delhi May 03, 2009, 14:36 IST |
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New Delhi-based Vishal Retail is looking to restructure its whole debt facility by June 2009, as the company is not in a position to pay its outstanding in the near future.
“We are looking to restructure Rs 730 crore worth of debt at a lower cost of interest to be able to run our operations without any problem,” said Ambeek Khemka, president, Vishal Retail. Vishal Retail had gross debt of over Rs 532 crore in FY08.
The company had to repay Rs 140 crore by March 31, 2009, out of which the company had paid Rs 50 crore. Khemka, without commenting on the remaining Rs 90 crore outstanding by March 2009 said “It is an ongoing process and we are looking at restructuring the whole debt now.”
The company’s cost of debt was between 13 per cent and 14 per cent and the expected interest outgo for FY09 is Rs 100 crore as against Rs 38 crore in FY08. “Our cost of interest will come down to 10-11 per cent as some of the banks are restructuring our short term debt into long term at 9.75 per cent interest rate,” Khemka added.
The analysts believe that the restructuring of debt will ease out the financial trouble of the company for short term only.
“The restructuring of Rs 730 crore worth of the loan will provide company a breather for the time being as the cost of short term debt was nearly 14 per cent. However, the company will still be paying around 10 per cent interest on its long term debt and the debt-to-equity ratio is expected to be around 2.6 in FY10 as well which is still too high for comfort," said Raghav Sehgal, equity analyst, Angel Broking.
The company has ended its tie-up with oil marketing company Hindustan Petroleum Corporation (HPCL) and has also shut down its apparel manufacturing units. “Our stores at the HPCL outlets were not making profit and we wanted to get rid of that burden. In future we plan to focus only on our core business,” said Khemka.
The company is in the process of relocating and merging its unviable stores. It currently has 2.8 million sq ft of retail space.
The company’s third-quarter profit dropped 86 per cent to Rs 2.15 crore. CARE Rating, while downgrading the retailer’s short-term bank facilities, said the risk was accentuated due to the company’s inability to carry out a proposed capital infusion, delay in sanction of working capital limits and higher liquidity risk.
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