Now there are BSE/ NSE listed companies, who are having pledged shares with the lenders. Such companies have to pay extra margin money on every share price fall. This erodes the working capital of the business concern and puts pressure on the resources. Now, you would see, the shares of many such companies like Glodyne Tech (Rs.6.85), Shiv Vani Oil and Gas Exploration Ltd (Rs.17.41), Core Projects Ltd (Rs.16.03), etc are moving up. It is because with the rise in share price, the risk of putting more and more margin funding comes down. This gives the companies much more room to play. In such a context, I asked to buy Pradip Overseas, for a slightly longer term perspective, as from FY15, the company is expected to show improved performance.
In F.Y. 2011-12, Several external factors such as high volatility in the cotton prices (main raw material), meltdown in overseas financial markets, RBI monetary policy, etc. had impacted the company’s ability to repay its debts in a timely manner leading to severe liquidity challenges. As a result, company had filed an application with SBI (lead banker of the loan consortium) to recast its debt obligations which was approved on March 27, 2012. The significant highlights of the package are as under:
i) Effective date for restructuring: 29.02.2012
ii) Under the scheme, debts are restructured as :
(a) Working Capital facilities comprising of cash credit, Letter of Credits, Purchase Bill Discounting and Guarantees of Rs.534 Cr.
(b) Conversion of overdrawn working capital facilities and short term loans amounting to Rs.403.26 Cr to Working Capital Term Loan (WCTL). WCTL carries interest rate of 12.50% p.a.
(c) Interest on WCTL for the first 9 months (from March, 2012 till November, 2012) shall be converted into Funded Interest Term Loan (FITL) carrying interest at 12.50% p.a. Repayment of FITL has started from April, 2013 as per schedule.
(d) The Company has offfered additional security for securing restructured debt]