McNally Bharat expects debt restructuring plan to be approved in second half of fiscal year
McNally Bharat Engineering Co Ltd, the EPC company promoted by the Khaitan family, expects debt restructuring plans to be approved by “the second half of this fiscal year.”
Restructuring is “extremely crucial” to get the company back on “a path of sustainable growth,” according to the FY21 annual report.
McNally Bharat has previously been classified as a non-performing asset by the lending banks. “The debt restructuring plan has progressed with the support of our lenders and we are on track to have it approved by the second quarter of this fiscal year. Debt restructuring is extremely crucial to get your business back on the path to sustainable growth, ”Chairman Aditya Khaitan said addressing shareholders.
In a note, management said: “The lenders …… have appointed / will appoint various agencies to assess the resolution plan, as decided at the last consortium meeting held on June 24, 2021.”
Management, in the annual report, said it was developing a strategy to restructure global debt “by seeking the cooperation of financially sound investors / business houses”.
McNally Bharat owes nearly 2,000 crore to a group of banks. Its bankers include Bank of India, SBI, IDBI Bank, Axis Bank, ICICI, Karur Vysya, PNB, Standard Chartered, Union Bank, UCO Bank, Bank of Baroda, Canara Bank, DCB Bank and DBS Bank.
The auditors listed details of defaults on loans and borrowings covering external commercial borrowings, working capital demand and cash credit.
The company also defaulted on interest payments of 316 crore (approximately) on borrowings for fiscal year 21, and did not record interest expense of 290 crore. “The total overall loss for the year (FY21) is underestimated at this point,” he said.
Management clarified that “the majority of lending banks have stopped charging interest on their unpaid debts” (as it was an NPA).
In FY 21, own-source operating income was ₹ 358 crore and suffered a loss of ₹ 50 crore.
“The industrial slowdown accompanied by banking restrictions on liquidity management had a negative impact on activity and profitability”, apart from the impact of the pandemic, working capital constraints and external factors.
In FY21, McNally won orders worth 1,192 crore through Joint Ventures (JVs). Although auditors raised questions about the company being a “going concern,” management, in its business outlook, said it was taking steps to have joint venture partners overseas where it could become a national partner for the execution of the project.
It pursues joint ventures in Europe and the Middle East to “execute projects aggressively” in the areas of smart cities, social sector buildings, renewable energy, water management and infrastructure.
“The company plans to use its core competencies in mining and mineralogy, solar power, material handling, and the provision of engineering and project management services in the Middle East, Europe and Africa. , especially in ferrous and non-ferrous metals and gypsum, fluorspar, rock phosphate, graphite, etc. ”adds the annual report.
For domestic projects, the company seeks to obtain projects of shorter duration and “a faster turnover of its resources”.