Burnpur Cement blames note ban for inability to repay loans
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Kolkata: In perhaps the first instance of a company declaring its inability to repay bank loans due to demonetisation, Burnpur Cement Ltd said in a regulatory filing on Saturday that its repayments had turned “irregular” with lenders because of “depressed” market conditions.
A small cement producer in eastern India, Burnpur Cement is looking to raise its production capacity from 600,000 tonnes, spread between two units, to 3 million tonnes (mt) per annum at a cost of Rs500 crore. On Saturday, it said it had fallen behind on repayments because its cash flow was impacted by demonetisation.
Demand has fallen 35-40%, Ashok Gutgutia, Burnpur Cement’s vice-chairman and managing director, said in a phone interview. Price per bag of 50kg has also declined by Rs15-20, he said, adding both revenue and profits have been impacted. “The matter is under discussion with lenders and the lead bank is positive on suitable restructuring,” Burnpur Cement said in its regulatory filing. “Other banks are in the process to follow the decision of (lenders’) consortium.”
Burnpur Cement’s lenders include State Bank of India, State Bank of Hyderabad, Central Bank of India and United Bank of India, according to its annual report for 2015-16.
The firm, which reported a revenue of Rs88 crore and a net loss of Rs12.7 crore in 2015-16, had long-term borrowings of Rs202 crore as of 31 March. It also had around Rs39 crore of short-term liabilities, or those that it had to pay off within a year.
Burnpur Cement’s Jharkhand unit is hobbled by infrastructure bottlenecks, according to a company official, who did not want to be identified. So, even without the “temporary dislocation” due to demonetisation, it was struggling to repay its term loans, according to this person.
In its pursuit for growth, Burnpur Cement has attempted to gain control of limestone deposits, but has not managed to streamline its production yet, this person added.