Mumbai: Delhi-based Vishal Retail Ltd is getting aggressive about reducing its debt burden. Fewer than three days after its proposal to reduce Rs730 crore in debt was admitted to the corporate debt restructuring (CDR) cell, the company is now looking to merge its operations with Vishal Water World, its Kolkata-based amusement park.
“This is one of the promoter companies and the idea of (the) merger is to try to optimise the resources of both the companies together and better utilize the assets which are there in the company,” said Ambeek Khemka, group president, Vishal Retail. Vishal Water World has a land bank currently valued by the company at about Rs60 crore. It plans to sell this land to raise money to pay back a part of its debt.
“The swap ratio (for the merger) decided is on an NAV (net asset value) basis and it is 1:10, i.e., for every one share of Vishal Water World, 10 shares of Vishal Retail will be given,” said Khemka. Vishal Water World has a total share capital of Rs6 crore, and over the last three years has averaged a profit after tax (PAT) of Rs6 lakh.
Restructuring exercise: Vishal Retail’s Ambeek Khemka. Madhu Kapparath / Mint
The swap ratio was arrived at with the help of a legal firm and a chartered accountant.
The CDR proposal also requires the promoters of Vishal Retail to pump in equity to the tune of Rs30-35 crore. This, persons familiar with the development said, could be met from the proceeds of the sale of Vishal Water World’s land bank.
Of the Rs730 crore of Vishal Retail’s debt, Rs350 crore is secured against the company’s current and fixed assets. This Rs730 crore includes a debt of Rs150 crore owed to two mutual funds. LIC Mutual Fund has a Rs100 crore exposure to Vishal Retail in two of its liquid schemes, and Deutsche Mutual Fund has invested Rs50 crore in Vishal Retail in the form of debentures. Since fund houses cannot participate in the CDR process, the terms of negotiation between these fund houses and the retailer are yet to be concluded.