Kolkata: A year-and-a-half after concluding an agreement to transfer its closed fertilizer unit in Kanpur to a joint venture with the Jaypee Group, Duncans Industries Ltd on Tuesday said it will repay within six months all its creditors, including some 55,000 people from whom it borrowed money through fixed deposits.
The firm’s outstanding debt of Rs 1,100 crore will be settled for around Rs 700 crore by June, according to Duncans chairman G.P. Goenka.
G.P. Goenka, chairman, Duncans Industries. File photo
Duncans’ latest annual report shows that at the end of March, loans amounting to Rs 722 crore were secured, or obtained by mortgaging assets. The rest—around Rs 399 crore—were unsecured loans, which include Rs 76.7 crore borrowed from some 55,000 depositors. The company may have paid off some of its creditors in the past nine months.
Secured creditors, mostly banks, have agreed to take a “51% haircut”, or to settle their claims for payment of about half the amount owed, according to Goenka. Unsecured creditors, including private firms of the promoter group, will receive 85% of their dues.
People who lent to the company through fixed deposits will be paid the full amount due to them. Some may have been waiting for more than a decade for their dues. Duncans, according to director A.K. Goel, started borrowing money through fixed deposits in the early 1990s.
Duncans’ liabilities have been taken over by the Jaypee Group, which acquired a 74% stake in the firm’s fertilizer unit for a token consideration of Rs 1 under an agreement signed in June 2010. By June 2012, Duncans will become debt-free, Goenka said.
The fertilizer unit has been carved out of Duncans, and on conclusion of the restructuring, the firm will be left with only its 17 tea estates in West Bengal. These estates, located in West Bengal’s Dooars and Darjeeling areas, yield a combined crop of around 15 million kg a year.
The fertilizer factory has an annual production capacity of 722,000 tonnes. Duncans acquired it in 1995 from the erstwhile ICI India Ltd, then a UK-headquartered paints maker. Dutch chemicals firm Akzo Nobel NV has since taken over Imperial Chemical Industries Plc (ICI). Production at the fertilizer factory was suspended in 2005.
Duncans’ restructuring hasn’t yet been concluded because the transfer of the fertilizer unit to a joint venture with the Jaypee Group required the clearance of the Board for Industrial and Financial Reconstruction (BIFR), the quasijudicial body that provides creditor protection to beleaguered companies.
The company expects to secure final BIFR approval for the restructuring within two weeks, Goenka said, addressing shareholders at Duncans’ annual general meeting in Kolkata on Tuesday.
Repayment of debt will begin on obtaining BIFR’s final approval. The company will get up to 180 days to repay all its creditors, but will try to pay off most of them by March, according to Goenka. “The earlier, the better,” he said. The company will get three months to repay its secured creditors.
Meanwhile, following the increase in the wages of Dooars’ tea garden workers, Duncans is looking to expand into production of “value-added” derivatives of tea to stay afloat. “There is no future in selling tea as a commodity,” Goenka said, adding that costs have overshot current prices by Rs 15 per kg.
Last month, tea estate owners, under pressure from the state government, agreed to raise the daily wages of workers from Rs 67 to Rs 86 with effect from 1 April this year. Under a three-year pact, the wages are to increase by Rs 5 a year for the next two financial years.
For Duncans, average realization from the current year’s crop was Rs 115 per kg, whereas costs have shot up to Rs 130 following the wage revision, according to Goenka.