Debt-ridden Hindusthan National Glass faces insolvency proceedings
The NCLT’s Kolkata bench has admitted a request to initiate the Corporate Insolvency Resolution Process (CIRP) against the country’s largest manufacturer of packaging glass, Hindusthan National Glass & Industries Ltd (HNG).
Insolvency proceedings were initiated against the debt-ridden company by DBS Bank Ltd, one of its financial creditors.
Documents filed by DBS Bank with the Tribunal indicate that it had extended external commercial loans (ECBs) of up to $ 20 million and $ 40 million.
Incidentally, HNG, as part of a loan restructuring carried out a few years ago, owes a consortium of 12 banks and lenders led by the State Bank of India about 1,710 crore. He paid around 290 crore in dues and, despite two extensions, defaulted on payments, other DBS Bank documents reveal.
Activity area contacted Mukul Somany, vice president and general manager and member of the HNG promoters group for comment. Calls and messages went unanswered.
The company, however, in a stock market notification, said it had been in discussions with lenders to work out a resolution plan and had already paid 772 crore until September 30; this includes 550.02 crore against the outstanding term loan, cash-based working capital, letter of credit and interest thereon, plus 222 crore against non-cash-based facilities.
Appointment of the PR
The Chamber composed of Judges Rajasekhar VK and Harish Chander Suri, while allowing the petition, also appointed Girish Sriram Juneja as the provisional resolution professional “to verify the contact details of creditors and to convene the creditors committee to develop a settlement plan. resolution ”.
It must also identify the potential resolution applicant within 105 days of the start date of the insolvency.
In accordance with the provisions of the Insolvency and Bankruptcy Code, 2016, a moratorium has also been declared which prohibits HNG from assigning or transferring its assets, the recovery of assets – even by owners or lessors – if said assets are in the possession of the company.
In addition, the moratorium also prohibits any seizure, recovery or execution of security deposits constituted by HNG through the SARFAESI law.
Bad financial situation
The Kolkata-based packaging glass maker had been struggling with high debt issues for some time now. His listeners had also reported concerns about accumulated losses and erosion of net worth.
For the quarter ending June 30, auditors noted that HNG has accumulated losses and that “her net worth has completely eroded”, that she has suffered losses during the current period and over the years. the previous period (s) / year (s), and the liability exceeds its current assets. The company has a high leverage ratio (debt being 2,28.6.41 crore and negative equity of ₹ 499 crore as of June 30, 2021. Realizable value of assets is less than amount payable to secured creditors , earnings per share is negative.
“In our opinion, based on the above, the company does not appear to be a going concern,” the auditors said.
HNG, for its part, had argued before the NCLT that it continued to be in both commercial and financial difficulties in recent years and that it could not service its debt. This led to it being classified as NPA. However, the company “with good faith intent” negotiated with the lenders to settle unpaid assessments and adjust loan accounts.
The resolution attempts included the cash payment of 1,719 crore and the transfer of 90 lakh shares (with a par value of 2) of HNG to secured creditors. Any outstanding amount not based on a fund at the end of the 3 month period must be repaid or covered by a 100 percent margin.
In August 2018, discussions took place with an investor, Lotus One. However, Lotus would not be able to invest unless all lenders approve the resolution plan. Due to the delay in signing the accordsa by the lenders, the resolution plan could not be implemented, HNG said in its submission to the NCLT. The glassmaker had also negotiated with two other companies – Goldman Sach (India) and SSG Capital Management – which agreed to finance them. Almost 1000 crore would be collected thanks to them.
HNG further argued in court that the companies took a nosedive in FY20 and FY21 and “due to reduced demand in the core segment – liquor and beer – which makes up” about 75 to 80 percent ”of total sales, it was strongly impacted. Since the execution of the MoU dated August 27, 2018, HNG has paid a total sum of 708.28 crore, it was said.