BackRuia pulls back UK unit from bankruptcy
Ruia pulls back UK unit from bankruptcy
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Kolkata: Pawan Kumar Ruia is not only having trouble restarting production at tyre maker Dunlop India Ltd but is also struggling to keep afloat a UK auto parts company he bought last year.
The Kolkata-based businessman said Schlegel Automotive Europe Ltd was “almost gone into administration" after it defaulted on payments to suppliers and service providers in December. In the UK, this typically means a firm is bankrupt.
“It was a close shave," said Ruia, who had announced in July that he had bought 100% stake in Schlegel, which manufactures rubber sealing systems for global auto brands such as Toyota, Nissan, BMW, Honda, Jaguar and Aston Martin, for an undisclosed sum.
To rescue the firm, Ruia introduced a three-day working week at its factory at Coalville, Leicestershire, when it reopened after Christmas. This resulted in almost 50% fall in payroll costs without job cuts, Ruia claimed. Schlegel employs about 500 people and wages account for at least 42% of the company’s costs.
“This company has capacity to generate sales of £45-50 million, but currently does around £28 million only," he said. But because of the downturn in the automobile sector, it was hit by a terrible “cash shortage".
Though he didn’t reveal how much the company owed its creditors, Ruia said they have agreed to give it more time to clear its dues after he intervened. “We should break even in March, but if our customers cut prices again, we are gone."
Ruia had acquired Schlegel with borrowed money. His entire stake in the firm has been mortgaged with a bank, which he refused to name. “It was an LBO (leveraged buyout), and the bank that lent to us to buy Schlegel has promised to give us working capital as well."
In India, Ruia is struggling to restart production at Dunlop’s Sahagunj factory in West Bengal. Dunlop, too, was an LBO. Ruia had borrowed from a consortium of lenders led by the UK’s Spinnaker Capital Group, mortgaging his stake. Though he has repaid $92 million he had borrowed to acquire controlling stake in Dunlop from Manohar Rajaram Chhabria’s family and refurbish the company’s factories by taking another loan, Ruia hasn’t yet managed to secure working capital to restart production at Sahagunj.
Though Spinnaker’s loan has been repaid, it was given 7% equity interest in Dunlop for final settlement of its dues.
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