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Informist, Friday, Sep 27, 2024

 

--Balmer Lawrie CMD: Arm, PFC may ink debt refinancing deal in 15 days
--Balmer Lawrie CMD: Debt refinancing to improve arm's cash flow
--Balmer Lawrie CMD: Debt refinancing to reduce arm's dependence on us
--Balmer Lawrie CMD: Loaned 101.8 mln rupees to arm to pay SBI

By Avishek Rakshit

 

KOLKATA – Balmer Lawrie & Co Ltd's sole subsidiary, Visakhapatnam Port Logistics Park Ltd, is likely to ink an agreement with Power Finance Corp Ltd in the next 15 days to refinance its debt of more than 760 mln rupees. The move will help improve the subsidiary’s cash flow and reduce its dependency on the parent company.

 

"Talks are in an advanced stage and the agreement will be signed with Power Finance Corp in the next 15 days which will help Visakhapatnam Port Logistics Park improve its financial position and reduce its dependency on us," Adhip Nath Palchaudhuri, chairman and managing director at Balmer Lawrie, told Informist.

 

Visakhapatnam Port Logistics Park, which was set up in 2019 and is Balmer Lawrie's sole multi-modal logistics hub, owes around 663.8 mln rupees to State Bank of India as term loan and 101.8 mln rupees to the parent company, as of today. Balmer Lawrie owns 60% stake in this subsidiary and the rest 40% is owned by Visakhapatnam Port Trust in lieu of providing 53 acres of land on which the project is set up. The subsidiary comprises 2.2% of Balmer Lawrie's total assets of 18.5 bln rupees, but is a drag on the parent's consolidated profit because it is a loss-making unit.

 

"However, after setting up this subsidiary, the multi-modal logistics hub ran into financial trouble and the COVID-19 situation made matters worse. Although Visakhapatnam Port Logistics Park is EBITDA (earnings before interest, taxes, depreciation, and amortisation) positive, the ballooning loan repayment results in it running into losses", Palchaudhuri said. A ballooning loan is one where the repayment starts with a minimal or moderate amount and increases gradually.

 

Under the repayment terms with SBI, Visakhapatnam Port Logistics Park has to pay around 20 mln rupees every financial quarter as debt repayment. "But this will change under the refinancing by Power Finance Corp. For the first year, no payment is to be made, and from second year onwards, the outgo to repay the debt will be only 3.6 mln rupees every quarter which will gradually balloon again. This will help the subsidiary improve its cash flow," Palchaudhuri said.

 

To meet its debt obligations, Balmer Lawrie gave an unsecured loan of 70.6 mln rupees to Visakhapatnam Port Logistics Park during the financial year ended Mar 31 at an interest rate of 9.6% per annum. "We will also be giving another unsecured loan of 21.2 mln rupees to Visakhapatnam Port Logistics Park this month to meet its repayment obligations to SBI," Palchaudhuri said. According to the official, the fresh loan is required as the repayment date to SBI is on Sep 30 and refinancing of the loan will be completed in mid-October. The cash-strapped subsidiary does not have enough monetary resources at its disposal to pay the debt instalment to SBI.

 

In its annual report for 2023-24 (Apr-Mar), Balmer Lawrie said that though its business from its sole multi-modal logistics hub is gradually increasing, it continues to experience challenges in achieving growth as originally expected. Continuing losses have eroded the net worth of Visakhapatnam Port Logistics Park by almost 50% and considering the situation, Balmer Lawrie has made a provision of 50% of its investment in this subsidiary.

 

Today, shares of Balmer Lawrie closed 4.1% higher at 274.20 rupees on the National Stock Exchange. End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Deepshikha Bhardwaj

 

 

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