KLG heads for debt restructuring

Gurgaon-based KLG Systel, provider of energy management solutions, seems to be heading for corporate debt restructuring (CDR) due to deteriorating financial health, said banking sources.

The company has investment from Intel Capital, the venture capital arm of global chip maker Intel, and the total debt being considered for restructuring is Rs 332 crore. The lenders include State Bank of India, ICICI Bank and IDBI Bank.

KLG Systel, listed on the Indian bourses, has been reporting a dip in revenue and net profit growth. It posted a loss of Rs 54 crore for 2010-11 as against net profit of Rs 18.2 crore in 2009-10. Net sales fell sharply to Rs 99.4 crore in 2010-11 from Rs 242 crore a year before. KLG helps in monitoring and control of electrical devices over the internet through its portal, Connectgaia.com. It also develops software that helps in utility billing and management.

Its profits began to slip from 2008-09. KLG reported profit of Rs 33.4 crore in 2008-09, down from Rs 52.7 crore in 2007-08. Sales declined to Rs 235 crore in 2008-09 from Rs 273 crore a year before.

“Reference was made to the CDR forum in June. The banks will firm up a package to revamp the debt and then put it up for approval. The debt involved is in excess of Rs 300 crore,” said a bank executive involved with the process, on condition of anonymity.

KLG did not respond to email queries. When asked for comments, managing director Kumud Goel said. “The company is governed by stock exchange regulations. It will communicate to the stock exchange if there is any development.”

In December 2010, Crisil had downgraded its ratings on the bank facilities of KLG to ‘D/P5’ from ‘BBB-/Negative/P3’. The downgrade reflects instances of overdrawing the cash credit facility by KLG.

The company’s performance sharply deteriorated in the first half of 2010-11, with cash losses of Rs 12.3 crore in the period due to a significant decline in revenues, coupled with continued delays in receipt of receivables. This has adversely affected KLG’s liquidity. This would remain weak over the near term, given KLG’s completely utilised bank lines and deteriorating business performance, Crisil had said.

The stock closed flat at Rs 54.30 on Friday at the Bombay Stock Exchange.