Capital goods maker Jyoti goes for second debt recast

The company's margins fell because of costlier raw material and higher employee costs

Hit by business slowdown and payment delays, Jyoti Ltd, a Vadodara-based capital goods maker, is again going for corporate debt restructuring (CDR). The company had exited the CDR system in 2011.

A senior public sector bank executive said the lenders had filed a report for Jyoti's admission again to CDR. Their total exposure to the company is about Rs 790 crore. Jyoti's operating margins have declined and there is blockage of receivables, leading to a cash flow mismatch. The board decided to approach bankers through the CDR cell for realignment of debt obligations, the company told the BSE exchange. Its margins declined due to a rise in raw material prices and employee costs. Also, the higher depreciation and interest charges led to a net loss. Jyoti posted a loss of Rs 36.7 crore in 2012-13 on a total income of Rs 417 crore. Its profit after tax stood at Rs 7.44 crore on a total income of Rs 507.7 crore in 2011-12. Lenders had recast debt for Jyoti in 2004.

 

The company exited CDR in 2011 by paying half of the recompense amount in cash. It issued equity shares to lenders for the balance amount. These lenders were Dena Bank, Central Bank of India and Bank of Maharashtra.

When asked for comments on the CDR plans, Ajay Kamdar, vice-president (finance) of Jyoti, said he was busy with meetings and it would be difficult for him to spare time for comments. In a note to shareholders for the coming extraordinary general meeting (slated for July 25), the company said despite a strong order book, revenue growth and profitability were muted due to factors beyond the control of the management. Sustained high working capital requirements, low recoveries and high interest rates further affected profitability. It had revamped business strategy to control costs and improve recoveries. A senior team was working to recover claims from clients, the company added.

Jyoti is reducing overheads through optimum management of manpower and material. It will balance the uncertainties of project-based divisions like irrigation and power by concentrating on faster turnover in products based divisions like Switchgear and heavy pumps. The product-based divisions have shorter cycle of order receipt to collection. The project-based divisions face uncertainties when the market and policy are sluggish.