Cement
Case Outline
- One of the oldest cement companies in Gujarat in operation for more than 4 decades
- Continuous losses because of overcapacity in the state, leading to poor demand, lower realization and competitive disadvantages vis-à-vis new players
- Because of consistent losses for a period of 4 years and consequent uncovered interest, debt ballooned by ~ 75 % to ~ INR 3.5Bn
- Capabilities to service < 50% of the outstanding principal on sustainable basis
Issue
- Negative EBITDA with substantial unserviceable debt
- Promoters’ were unable to provide funds for its ongoing expansion project and lenders were unable to pump funds into a non performing account
- Threat of punitive measures by the state government for huge statutory overdues
- Consistent decline in financial performance led to erosion of net worth
Normal Solution
- Debt reduction to sustainable level by way of :
- One-Time Settlement, requiring banks to write down debt by 50% or more;
- Strategic sale of the company to larger competitor
- Because of losses and poor demand, company would have fetched poor valuation
Brescon Value Add
- Facilitated investment of ~ INR 1Bn by a leading special situation investor for settlement of debt, government dues and completion of stalled captive power plant project
- Led the restructuring process and prioritized cash flows to pay government dues without any further delay
Impact
- Improvement in profitability (EBITDA of ~ INR 1Bn vs EBITDA loss of INR 0.20Bn within 5 years, post restructuring)
- Completion of the expansion project and the captive power plant
- Increase in market capitalization by over 3.5x within a period of two years
