corporate debt retructuring by nakul malik

8/8/2019 Corporate Debt Retructuring by Nakul Malik

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Capital Structure refers to thecombination or mix of debt and equity

which a company uses to finance itslong term operations.

Restructuring capital means reallocatingit for various motives


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To enhance liquidity

To lower the cost of capital

To reduce risk

To avoid loss of control

To improve shareholder value


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Debt restructuring is a method used by companieswith outstanding debt obligations

Done to alter the terms of the debt agreements in

order to achieve some advantage. Companies use debt restructuring to avoid default

on existing debt or to take advantage of a lowerinterest rate.

A company will often issue callable bonds to allowthem to readily restructure debt in the future.

The existing debt is called and then replaced withnew debt at a lower interest rate.

Companies can also restructure their debt by alteringthe terms and provisions of the existing debt issue


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There can be many benefits to Debt Restructuring. Working with aprofessional debt restructuring agent, such as Corporate Turnaround, offersyour business specific benefits including help with:

Reducing your debt and stretching it out over time Converting overwhelming debt obligations into manageable and

affordable monthly payments .

renegotiating the terms of the debt agreements in order toachieve a mutual benefit between the business and its creditors

Spending less time dealing with creditors, collection agencies andattorneys where

Your debt restructuring agent handles negotiations with applicablerelationships Balancing your budget and managing your cash flow Rebuilding your credit and credibility Keeping your doors open and avoiding bankruptcy


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In the year 1997, Subhiksha opened its first store at Thiruvanmiyoor in Chennaiwith an

investment of around Rs 4-5 lakh, with the theme, why pay more when youcan get it for

less at Subhiksha

Offering the branded goods at a lower price than their competitors Whichcouldmake

them stand in the competitive retail industry. Subhikshas turnover grew from Rs 330 crore in 2005-06 to Rs 833 crore in 2006-

07, and then to Rs 2,305 crore in 2007-08 (year ending March 31, 2008). Likewise,

having grown from 150 stores in September, 2006 in Tamilnadu to 1,600-oddstores across the country in September, 2008, Subhiksha has been the envy ofits competitors. By the end of this year, it was looking at grossing a turnover ofRs 4,300 crore from 2,300 stores.

"We were facing a lot of difficulty in accessing data across different regionsusing this local solution," concurs Ankur Saigal, vice president (Tech Initiative),Subhiksha Trading Services. "Besides business expansion brings its owncomplexities and we needed a robust platform to streamline our operationsand control."


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Offering the branded goods at a lower price than theircompetitors Which could make them stand in the competitiveretail industry.

Subhikshas turnover grew from Rs 330 crore in 2005-06 to Rs 833

crore in 2006-07, and then to Rs 2,305 crore in 2007-08 (yearending March 31, 2008). Likewise, having grown from 150 storesin September, 2006 in Tamilnadu to 1,600-odd stores across thecountry in September, 2008, Subhiksha has been the envy of itscompetitors.

By the end of this year, it was looking at grossing a turnover of Rs4,300 crore from 2,300 stores.

"We were facing a lot of difficulty in accessing data acrossdifferent regions using this local solution," concurs Ankur Saigal,vice president (Tech Initiative), Subhiksha Trading Services."Besides business expansion brings its own complexities and weneeded a robust platform to streamline our operations andcontrol."


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The first and big mistake committed bythe management of Subhiksha was

expanding the number of stores rapidlywithout sufficient funds in hand. Theythought of raising equity during lastSeptember but the things had gone too

far before they woke up.T

he globalmarkets had started collapsing andthere were no possible chances ofraising funds


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Subhiksha Trading Services has come under firefrom television channels for not clearingadvertising dues that run around Rs 8 crore.

Subhiksha is believed to owe Rs 35 croreagainst goods, Rs 18 crore against wages, andRs 20 crore against lease rents. The company,according to the report, is also carrying a debt

of Rs 700 crore at an average interest cost of12 per cent per annum.

Expansion of Stores without adequate systemcontrol and IT Support. Thats why there was ahuge Audit and abnormal losses in the system


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Subhiksha, which was forced to shut all its stores as it ranout of cash, is in talks with over ten banks to restructureloans of nearly Rs 750 crore through a CDR (corporatedebt restructuring) exercise. Its promoter R Subramanian

has said that the company can resume operations after itgets cash of Rs 300 crore. In all, 13 banks have cumulatively lent Rs 750 crore to the

company. The banks that are part of the restructuringinclude ABN AMRO Bank (Rs 50 crore), Bank of Baroda(Rs75 crore), Centurion Bank of Punjab (Rs 40 crore),D

evelopment Credit Bank (Rs 25 crore), Federal Bank (Rs50 crore), HDFC Bank (Rs 65 crore), ICICI Bank (Rs 155crore), Standard Chartered Bank (Rs 25 crore), TheHongkong and Shanghai Banking Corporation (Rs 85crore) and Yes Bank (Rs 50 crore)


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Cholamandalam DBS is a pan-Indian, compositefinancial services provider. It comprises the parentcompany, Cholamandalam DBS Finance Limited(CDFL are listed in the Madras (MSE), Mumbai (BSE)and National (NSE) Stock Exchanges.

Cholamandalam Investment & Finance CompanyLimited (CIFCL) was incorporated in 1978 as thefinancial services arm of the Murugappa Group.

In 2005, post the joint venture partnership between

the Murugappa Group and DBS Bank Limited,Singapore, the Company was renamed asCholamandalam DBS Finance Limited (CDFL).


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The company emerged as acomprehensive financial services solution

provider that offers vehicle finance,business finance, home equity loans,mutual funds, stock broking anddistribution of financial products to its

customers.T

he Company operates fromover 140 branches across India with anasset under management of aboutRs.8546 Crores.


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Net loss of Rs.27.73 crores for the threemonths ended December 31, 2008 ascompared to the net profit of Rs. 20.25 Crlast year.

Along with this it had it infuse equity (Rs.300Cr). Profit before tax (PBT) had gone downcompared to 2008 which lead to drop in

earnings per share (EPS). Dividend was not paid for the year 2008

financial year. There was drop in the capitaladequacy ratio from 15% to 12%


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Capital Reduction The special provision of Rs. 323.53 Cr. Is

made : a)To make provision for the standard assets,

for an amount no exeeding Rs. 200Cr. b)To write off the bad debts/loan

losses/other non recoverable assets, for anamount not exceeding Rs. 100 Cr.

c)Provision for the doubtful receivables, foran amount not exceeding Rs. 23.53 Cr.


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Hindalco Industries is India's largest Aluminummanufacturing Company and is a subsidiary ofthe Aditya Birla Group.

It is run by one of the world's youngestbillionaires, Mr. K.M. Birla. The company has annual sales of $ 5 billion

and employs 13,675 people and is listed onForbes 2000.

A metals powerhouse with a turnover of US$ 14billion, Hindalco is the world's largest aluminiumrolling company

One of the biggest producers of primaryaluminium in Asia.


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Hindalco Industries' shares slipped3.06%,during February 2009.

Hindalco had acquired Canadianaluminium product maker Novelis for $5.9billion in 2007 in an all-cash transaction,which also included a debt of $2.4billion.


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Credit to the business reconstructionreserve account shall not exceed the

balance lying to the credit of thesecurities premium account of thecompany as on December 31, 2008,Hindalco said


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corporate debt retructuring by nakul malik

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