Business Today

ALOK INDUSTRIES

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Textile major Alok Industries, which exports to 90 countries, diligently followed the strategy of creating globally competitiv­e capabiliti­es across the value chain – from yarn to specialise­d products. While the strategy was right, financed diversific­ation outside its core textiles manufactur­ing operations in India – such as the acquisitio­n of Mileta in Czech Republic, Store Twenty One in the UK, and real estate investment­s under Alok Infrastruc­ture – marred the fortunes of the company.

The Ahmedabad bench of NCLT has already admitted SBI’s insolvency applicatio­n against the company. Two years ago, the bankers failed to convert a part of the loan into equity under the SDR route. The idea was to change management control from the Jiwrajka family. Currently, the company’s debt is in excess of total equity in the system – debt of `22,075 crore against equity of `1,357 crore. Promoters’ equity is too low at 28 per cent. Out of the total debt, only `6,000-8,000 forms sustainabl­e debt. The company, say bankers, does not fit into S4A as that requires 50 per cent debt to be sustainabl­e. They see no point in converting debt into equity as the company has lost significan­t market share. The company’s revenues have crashed from over `20,000 crore two years ago to `8,000 crore.

“The debt overhang will never create value for equity shareholde­rs,” says a banker. The only solution is to write off the debt. Demerging its businesses, especially real estate, and bringing in a strategic investor is another viable option under the Bankruptcy Act. An email sent to the company went unanswered.

 ??  ?? Consolidat­ed figures; Debt as on Mar 2016; Total income for 2016/ 17; Promoter stake as on Mar 2017; Accumulate­d losses between 2013/ 14 and 2016/ 17
Consolidat­ed figures; Debt as on Mar 2016; Total income for 2016/ 17; Promoter stake as on Mar 2017; Accumulate­d losses between 2013/ 14 and 2016/ 17

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