LT Foods to challenge insurance claim rejection

Oriental Insurance had rejected the Rs 189-cr claim arising out of a fire at LT's Madhya Pradesh mill in 2014

Daawat brand basmati rice producer and exporter LT Foods plans to challenge the rejection of insurance claims made by it for the damage to paddy and rice inventory in a fire at its Raisen unit in Madhya Pradesh during June 2014.

The fire damaged paddy worth Rs 189 crore and the stock was fully insured with Oriental Insurance Company (OIC). However, when LT Foods claimed the payment, OIC rejected it.

The claim amount was six times its net profit of Rs 30.65 crore in 2014-15 and 63 per cent of its standalone net worth of Rs 302 crore as on end-March 2015.

Vijay Kumar Arora, chairman of LT Foods, said OIC gave no reasons. “We had made a genuine claim, after taking advice from top lawyers, including P Chidambaram, former finance and home minister of India, and Abhishek Manu Singhvi, Congress party spokesperson. We will file suits against OIC,” he said.

Efforts to reach A K Saxena, chairman and managing director of OIC, did not elicit a response.

As a result of stressed assets, credit rating agency ICRA has kept LT ‘under watch’. LT had already availed bank funding of Rs 135 crore. With repudiation of the claim, the repayment/funding gap will need group refinancing. This is likely to impact the liquidity position in the short to medium term, and keep debt levels elevated.

LT recently acquired the branded rice business of Hindustan UniLever. The company, with its Daawat and Heirtage brands, has a presence in both the domestic and international markets. It has manufacturing facilities in Haryana and Punjab, with 84 tonnes per hour of milling capacity. Exports contribute nearly half the annual revenue.