McNally Bharat Engineering Ltd (MBEL), the stressed engineering company of the Williamson Magor Group (WMG) is relying on strategic investors to tide over the ongoing financial crisis in the company which it believes will be addressed by the end of the current fiscal year.
MBEL has roped in a consortium of investors led by Turbovent Industries as a strategic investor in the company and due diligence is underway currently.
After this process is over, Turbovent is likely to submit a binding offer which will see infusion of funds in MBEL at the cost of stakeholding.
In case the investors pick up a stake, it will nominate its representatives to the MBEL board.
The Calcutta High Court, in September this year, had passed an ad-interim (temporary) order of injunction restraining Williamson Magor & Co, one of the investment arms of WMG; McLeod Russel and Eveready Industries - other group entities - from transferring, alienating, or encumbering any of their tangible or intangible assets till an application filed by Infrastructure Leasing & Financial Services (IL&FS) was disposed of.
IL&FS had granted a term loan of Rs 170 crore to WMG through Williamson Magor & Co. Although both McLeod and Eveready had appealed for a stay on the order, it was rejected. However, the case is currently underway in the Calcutta High Court.
On the other hand, shareholders of McLeod defeated its special resolution to increase the borrowing limit or sell more assets.
“There will be some dilution in the promoters’ stake as the investor picks up a stake. It may be that the investor will become the single-largest shareholder in the company as well; but it will all depend on the final binding offer we get”, Manoj Digga, chief financial officer at MBEL told Business Standard.
As on September-end, the promoters have a 43.53 per cent stakeholding in the company of which, 21.61 per cent is pledged.
Once the binding offer is made, MBEL will approach its lenders with the proposal to accept the offer. Fourteen out of MBEL’s 17 lenders have accepted an Inter-Creditor Agreement (ICA) to recast its debt and the rest three have asked for some amendment to the ICA.
“The amendment is under process and will be proposed to the lenders as soon as it is ready. The amendment is basically over terminologies and minor changes to the existing ICA”, Digga told this newspaper.
Digga said MBEL currently has fund based debt of around Rs. 2,000 crore and non-fund based debt of around Rs. 1,200 crore.
“The process of roping in the strategic investor and the debt restructuring will hopefully be over by the end of this fiscal year. By early January next year, as per RBI clause, the lenders will have to take a final call on the debt restructuring outside the scope of NCLT”, he told this business daily.
Digga claimed that financial lenders are unwilling to take the company to NCLT and prefer to settle their claims outside the scope of IBC.
While MBEL is working to reduce debt by stake dilution and vying for a recast, it has simultaneously roped in Turkey based Kaylon Insatt Sanayi ve Ticaret as a collaborator to bid in infrastructure projects.
“For the EPC business, one needs technology, financial soundness and the ability to execute contracts. While roping in the strategic investor will provide some degree of financial soundness, the collaboration with Kaylon will be advantageous for us on technology. MBEL has the ability to execute contracts”, Digga said.
The current order book of MBEL stands between Rs. 1,000-1,200 crore, spread between power, steel, water and construction sectors.