Mallya's UB Engineering files for insolvency

Pune-based firm owes around Rs 450 crore to five lenders

Pune-based UB Engineering Ltd (UBEL), part of the Vijay Mallya-led UB group, has filed for insolvency at the National Company Law Tribunal (NCLT). "The company has dues of around Rs 450 crore to five banks. It has moved the NCLT in Mumbai today," an official familiar with the development told Business Standard.
 
Axis bank, YES bank, Corporation Bank, IDBI Bank and Laxmi Vilas Bank are the lenders. The company has classified term loans, cash credits and other facilities availed of from banks as 'Other Current Liabilities', which at the end of FY16 stood at Rs 434.9 crore, according to the annual report. UB Holdings holds a 37 per cent stake in the company.

 
Though listed, the stock has been suspended from BSE for penal reasons. Its market cap had earlier eroded to Rs 13.5 crore. Under the new insolvency law, the NCLT will take a call in the next two weeks on whether to admit the petition case or not. If admitted, the promoter would lose control over the affairs and a committee of creditors and insolvency professionals would take over.
 

Emails sent to the UB Group spokesperson and the company's secretarial department did not elicit any immediate response. UB Engineering specialised in EPC projects, infrastructure, on-site fabrication of structures, installation, testing and commissioning of electrical and mechanical equipment. It also has pre-qualification credentials in electrical sub-station projects up to 400 KV.

 
However, like some of its sister concerns, which have suffered following troubles emanating from Mallya's failed airline venture, Kingfisher Airlines, UBEL has been struggling to service its debts. The banks had classified the account of the company as a non-performing asset (NPA) with effect from April 1, 2014.

Following this, the company was classified sick and referred to BIFR. While the company contested the moves, its turnover plunged from Rs 583 crore in FY13 to Rs 78 crore in FY16.
 
In its annual report dated November 8, UBEL Managing Director J K Sardana identified the key risks for the company as follows: "Your company is exposed to risks due to various legal cases filed by the purported creditors. Your company is exposed to legal cases or recovery actions initiated by the lenders and other statutory authorities. Early termination of existing jobs in view of cash crunch and invocation of bank guarantees, with consequential threat of loss of revenue, material, other infrastructure." For the year ended March 2016, UBEL reported a net loss of Rs 168.23 Crore.

 
Following the classification as NPA, the banks have enforced the security, comprising land, buildings and machinery situated at Durg (Chhattisgarh), Shirwal, Pune and Chiplun. "The company is contesting the action initiated by the consortium of banks with appropriate authorities. Consortium banks have filed miscellaneous applications with BIFR for abatement of reference under Section 15 of SICA and some member banks have individually filed applications with appropriate authorities for recovery of their dues. The company is contesting the same by appropriate legal process," UBEL said in its annual report. Now after classification by consortium banks, the company has provided for interest on outstanding and dues to the banks, it added.

Incorporated in 1972 as Western India Enterprises (WIEL) by A S Wardekar, the company had come into the UB fold in 1988. After its merger with Best & Crompton in 1989, it was rechristened UB Engineering in 1993.

Dues to Banks	378.92
Other Payables	46.57
Provisions - Gratuity / Leave Encashment / Superannuation Repayable After One Year	7.571
Other loans and advances	1.9
Total	434.971

Liabilities as on March 31, 2016. All figures in Rs Cr. Source: Annual Report