Agrochemicals and Chemicals
Case Outline
- A prominent public sector fertilizers and chemicals manufacturing company.
- Company incurred considerable losses because of revision in pricing norms, higher feedstock prices, huge roll-back of past subsidies and poor off-take of fertilizers due to draught in its major markets
- Had already undergone restructuring once in the past
- Losses had reached to a peak of INR 4Bn on a debt level of INR 15Bn.
- Any fresh infusion from Sponsors ruled out in view of fiscal constraints.
Issue
- Financial stress in a company though on record with good productive assets, attractive products margins, great brand recall & latent market opportunities.
- Sponsors were contemplating divestment in the face of deteriorating financial position
- Lenders were in favour of liquidating assets to salvage value
Normal Solution
- Divestment by sponsors would have happened at poor valuation because of losses, debt, and headwinds in the industry.
- Re-capitalization of company by Sponsors which was not feasible at that time
- Deferment of loan and reduction of interest
Brescon Value Add
- Provided the banks with different maturity and return options, based on an in-house developed “Risk Return Matrix” framework, used for the first time
- Payment deferral accepted by the banks freed up enough cash to settle Foreign Banks
- Innovative re-capitalization through deferment of government taxes for five years
Impact
- Based on effective debt resolution, management‘s unwavering focus on results and favorable market conditions, the company reported ~ INR 3Bn PAT within 3 years vs a loss of ~ INR 4Bn prior to restructuring.
- Prepayment of the CDR debt within the next two years of debt restructuring
- ~ 3x increase in the shareholders’ wealth within 3 years.
