The client’s challenge:
A well established, integrated construction, infrastructure development and management company, with a pan India presence across multiple verticals, was growing at a CAGR of over 40 % over the last decade. The Company, with orders on hand of over INR 100Bn, was well poised to take advantage of the infrastructure boom expected in the country which was also supported by its robust business model with its presence in both EPC and development space. However, company’s operating margins started looking down from FY 12, in line with the industry trends, due to sluggish demand and poor liquidity owing to delays in Govt clearances and collection of receivables from nodal authorities. Headwinds in the economy deterred company’s efforts for divestment of assets to infuse needed liquidity.
It was at this juncture that Brescon’s was roped in to assist the company in navigating the complex process involving dealing with a set of ~ 10 lenders, Govt / Nodal agencies, management and shareholders. Brescon realised that it was critical to devise a comprehensive solution for addressing the liquidity crunch faced by the company comprehensively, which envisaged various measures including securing repayment holiday, conversion of large portion of working capital irregularity into term loan, shifting of part of the loans to other subsidiaries of the company and raising of additional funding from the lenders. Most importantly, a realistic estimate of the cash flow dynamics was worked out based on mapping of all the projects with their physical and financial progress benchmarks over project life period and delivery time frames.
With the debt realignment, pooling of adequate funds, and rationalization of the capital outlays across the optimized projects, the company was able to consolidate its operations by way of :
- Reduction in the number of operational project sites by speedy execution, foreclosure etc
- Prioritization of the cash flows for the projects based on operational efficiency and productivity rating
- Focussing on EPC contracts rather than capital intensive BOT projects
- Early redemption of debt facilitated by “Debt–Asset Swap” between parent and the subsidiaries, that helped banks faster recovery of their dues.
- Company continues to be on its path to recovery and has emerged as one of the few quick turnaround cases in the EPC space in the country with a bankable balance sheet.