Home >companies >Promoters of Ipca Labs said to have bought into Gammon unit

Mumbai: The Godha family, promoters of Ipca Laboratories Ltd, has bought into Gammon India Ltd’s power transmission and distribution (T&D) business through a private entity, said two people with direct knowledge of the discussions.

In a 27 February notification to BSE, Gammon India had said a 75% stake in the power distribution unit has been transferred to Bilav Software Pvt. Ltd, a private entity.

Lenders to Gammon India had decided to invoke the powers under Reserve Bank of India’s (RBI’s) strategic debt restructuring (SDR) norms and convert a part of the company’s 15,000 crore consolidated debt into equity. In December, they converted 245 crore to a 60.10% stake in the company.

Since then, efforts had been on to find buyers for parts of the business.

“The promoters of Ipca Labs also have interests in Bilav Software and have taken over Gammon’s T&D business through it, to set up a standalone company," said one of the two people quoted above, seeking anonymity as they are bound by a confidentiality agreement.

According to a 14 December document available on the ministry of corporate affairs website, Prashant Godha, executive director of Ipca Labs, is a director on the board of Bilav Software.

The same document provides pgodha@gmail.com as the official email address for Bilav Software. The document, however, does not show members of the Godha family having shareholding in Bilav Software.

An email and a phone call to Premchand Godha, chairman and managing director of Ipca Labs, on 21 March remained unanswered till the time of going to press.

The Godhas are not the first entrepreneurs from the pharma industry to invest in the energy business. In February last year, Sun Pharmaceutical Industries Ltd promoter Dilip Shanghvi had purchased a 23% stake in Suzlon Energy Ltd for 1,800 crore.

“The buyer is looking to diversify and invest in businesses other than his primary interest in pharma," said the second person quoted above, a public sector banker, seeking anonymity.

In its 27 February statement, Gammon India said it had transferred a 75% stake in its subsidiary Transrail Lighting Ltd to Bilav Software. Transrail Lighting holds Gammon’s power T&D business. “Pursuant to this transfer, Transrail Lighting ceases to be a subsidiary of Gammon India," it said.

In October, the infra firm had signed an investment-cum-shareholders’ agreement with Mumbai-based Bilav Software, which had agreed to acquire from the company a 75% stake in Transrail Lighting. Under the agreement, Bilav Software had also agreed to infuse 47.70 crore in Transrail Lighting in two tranches by subscribing to optionally convertible debentures (OCD).

Of the total 15,000 crore debt Gammon India has, the T&D business contributed about 3,900 crore.

The T&D undertaking essentially includes tower manufacturing and conductor manufacturing businesses carried out by the firm through its facilities located in Deoli in Rajasthan and Silvassa in Dadra and Nagar Haveli, along with related assets, liabilities and employees.

The firm is also selling some of its other assets in a bid to reduce its large debt.

In August 2015, Gammon India’s subsidiary Gammon Infrastructure Projects Ltd had agreed to sell six road and three power projects to BIF India Holdings Pte. Ltd for about 563 crore. BIF is controlled by Canada-based Brookfield Asset Management Inc. and Core Infrastructure India Fund Pte. Ltd.

Banks had decided to invoke SDR after the two-year moratorium period in the firm’s corporate debt restructuring (CDR) package, which was approved in September 2013, came to an end. While banks are allowed to take over majority equity in any firm where there is stress, a number of cases where SDR was invoked were cases where the CDR package had either failed or was close to failure.

The decision to first implement CDR in Gammon India was made after the firm’s profitability took a hit, owing to a slowdown in the economy and execution delays across the sector.

In October-December, Gammon India’s income from operations stood at 807.5 crore and a loss of 121.21 crore. In comparison, in the quarter to September 2013, the firm had reported income from operations worth 1,045.58 crore and a net loss of 261.54 crore.

“It is an encouraging sign for the banking system, given a sale will yield a better economic outcome for lenders as compared with a liquidation. Going ahead, we will hopefully see many more local and international entrepreneurs interested in buying stressed assets. As long as the stressed asset sale process is transparent and the buyer is genuine, banks should move ahead to close the sale to realize proceeds quickly," said Nikhil Shah, managing director, Alvarez and Marsal (India), a stressed asset turnaround firm.

Lenders are actively discussing multiple deals in firms where they had invoked SDR so that they can sell the majority stake they have acquired after converting a part of the debt.

Since SDR rules were introduced in June 2015, lenders have converted debt to equity in a number of firms, including Electrosteel Steels Ltd, Ankit Metal and Power Ltd, Rohit Ferro-Tech Ltd, IVRCL Ltd, Gammon India, Monnet Ispat and Energy Ltd, VISA Steel Ltd, Lanco Teesta Hydro Power Pvt. Ltd, Jyoti Structures Ltd and Alok Industries Ltd.

Banks are in the middle of a major clean-up drive, trying to provide for and resolve as many stressed loans as possible before a March 2017 deadline set by RBI governor Raghuram Rajan.

This clean-up has led to a surge in gross NPAs of 39 listed banks, which jumped to 4.38 trillion in the quarter to December from 3.4 trillion in the September quarter, according to data collated by corporate database provider Capitaline.

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