The National Company Law Tribunal (NCLT) has ordered initiation of insolvency procedure against listed firm Eason Reyrolle in a petition filed by State Bank of India and Canara Bank. The banks together claimed over Rs 230 crore from the company, along with interest and other charges.
The company is engaged in power management products, systems and services.
The lenders requested the initiation of the Corporate Insolvency Resolution Process (CIRP) against the company, declaration of moratorium and appointment Interim Resolution Professional (IRP). Both the applications were taken up together to be disposed of in a common order.
State Bank of India said it had around Rs 204.89 crore of outstandings from the company as on August, 2019, plus interest and other charges, less recoveries if any. Canara Bank is claiming an outstanding amount of Rs 59.31 crore plus interest till July, 2019, following a default that arose in relation to the overdraft cash credit facility granted by the Financial Creditors to the Corporate Debtor.
Eason Reyrolle is engaged in providing complete range of power management products , systems, solutions and services spread across generation, transmission, distribution and industrial applications. Canara Bank classified the account as a non-performing asset in September, 2017. SBI classified the account as NPA in 2015.
The company said that it has been in the process of locating investors or other financial sponsors to take over some of the liabilities owed to the Banks and the company is in the stage of final discussions. Initiating CIR process at this point would affect the ability of the company to effectively continue as a going concern.
It argued that though it has been a pioneer in the industry and the relevant product market it deals in, there were certain setbacks which brought down the performance of the company. Working capital has been affected, resulting in losses over the past few years. The trends of the industry have shifted to offering turnkey projects, impacting the independent equipment manufacturers. The company shifted its main focus to undertaking turnkey projects. Some of the projects were delayed and others came to a standstill due to certain extraneous factors like security issues, and issues with right of way clearances for lines.
The company has to receive around Rs 103.88 crore from various State utilities. These include Andhra Pradesh Power Utility Corporation, Assam Power Distribution Company, Bangalore Electricity Supply Corporation Ltd, Eastern Power Distribution Ltd, Indian Oil Corporation Ltd, Karnataka Power Transmission Corporation Ltd, Power Grid Corporation of India, and Tamil Nadu Electricity Generation Corporation. The situation further led to a cash crunch and liquidity issues, as the receivables could not materialise. The company says it has been trying to turn around its operations despite all these problems.
A viability report of the company said that a projected total possible market opportunity of Rs 242 crore for the year 2020-21 with up to Rs 337.9 crore in the year 2026-27. It also shared the projections for the profit of the company going forward.
The NCLT, while allowing the CIRP on May 5, observed that the plea of company being a going concern cannot be made a ground for delaying initiation of CIRP or to keeping the application of the Banks in abeyance. It has also appointed an IRP and imposed moratorium on certain actions including transfering, encumbering, alienation or disposing of any of the assets or legal right or beneficial interest by the company.