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ARCIL revives ailing Malwa Industries with working capital
13 Apr '19
2 min read
Pic: Malwa Industries
The Asset Reconstruction Company (India) Limited (ARCIL) has revived ailing denim manufacturer Malwa Industries in Ludhiana with a last-mile funding towards working capital needs to the tune of ₹20 crore, after acquiring over ₹500 crore of the firm’s debt. It acquired more than 97 per cent of the ₹550-crore debt from a five-lender consortium to hasten the revival.
ARCIL is now in the process of acquiring the remaining outstanding debt, ARCIL chief executive officer and managing director Vinayak Bahuguna told a news agency. Malwa Industries is one the few integrated denim manufacturers in India.
ARCIL’s restructured debt is a mix of vanilla debt, hybrid instruments and equity, which balance well the serviceability of the business and our return expectation, Bahuguna said.
Malwa has a client base spread across the globe that include Levi's, US Polo Association, H&M, Debenhams, United Colors of Benetton, Killer, Pepe and Jack & Jones.
ARCIL also provided an adequate moratorium for repayments to the company to allow it some breathing space and wrote off the unsustainable portion of the debt.
During peak performance in fiscal 2005-06, Malwa Industries with a capacity of 20 million metres per annum (MMPA) reached a turnover of ₹204 crore.
Malwa Industries faced problems in 2007-08, when the rupee appreciated against the dollar, making India's exports uncompetitive and creating an oversupply situation in the domestic market.
Further, the government hiked the minimum support price for cotton by more than 40 per cent in the following year. An unprecedented rise in cotton prices globally thereafter put pressure on the company's performance and it reported a cumulative loss of ₹139 crore between 2009 and 2014, followed by working capital shortages and under-utilisation of capacity.
The company restructured its debt under the Corporate Debt Restructuring process in 2014, buy could not receive the required additional funds in time and hence was unable to increase its production as per the plan and failed to revive.
The subsequent infusion from promoters to the tune of ₹55 crore in the form of unsecured loans and preference shares also did not suffice. (DS)
ARCIL is now in the process of acquiring the remaining outstanding debt, ARCIL chief executive officer and managing director Vinayak Bahuguna told a news agency. Malwa Industries is one the few integrated denim manufacturers in India.
ARCIL’s restructured debt is a mix of vanilla debt, hybrid instruments and equity, which balance well the serviceability of the business and our return expectation, Bahuguna said.
Malwa has a client base spread across the globe that include Levi's, US Polo Association, H&M, Debenhams, United Colors of Benetton, Killer, Pepe and Jack & Jones.
ARCIL also provided an adequate moratorium for repayments to the company to allow it some breathing space and wrote off the unsustainable portion of the debt.
During peak performance in fiscal 2005-06, Malwa Industries with a capacity of 20 million metres per annum (MMPA) reached a turnover of ₹204 crore.
Malwa Industries faced problems in 2007-08, when the rupee appreciated against the dollar, making India's exports uncompetitive and creating an oversupply situation in the domestic market.
Further, the government hiked the minimum support price for cotton by more than 40 per cent in the following year. An unprecedented rise in cotton prices globally thereafter put pressure on the company's performance and it reported a cumulative loss of ₹139 crore between 2009 and 2014, followed by working capital shortages and under-utilisation of capacity.
The company restructured its debt under the Corporate Debt Restructuring process in 2014, buy could not receive the required additional funds in time and hence was unable to increase its production as per the plan and failed to revive.
The subsequent infusion from promoters to the tune of ₹55 crore in the form of unsecured loans and preference shares also did not suffice. (DS)
Fibre2Fashion News Desk – India
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