Mumbai: The promoters of Indage Vintners Ltd, one of India’s earliest wineries, have pledged at least 97.9% of their 25.42% stake in the company, an August analyst report of Bank of America Merrill Lynch said.

The pledging of almost all the shares of the Chougule family marks a dramatic decline for the firm, which is short of working capital and has mounting debt due to overseas acquisitions. It also faces employee ire because a majority are not getting paid since at least November.

Cash crunch: A July letter from the office of Ranjit S. Chougule (above) to employees confirms payment defaults on salaries and statutory dues.

According to two managers, who spoke on condition of anonymity, at least two banks that earlier extended credit to the firm for working capital have blacklisted it due to defaults. Mint could not be independently verify this with the bankers.

“The company has a financial liability of Rs450 crore to be paid off immediately," said another executive, who is leaving the firm shortly and did not want to be named.

Indage’s corporate communications manager Madhu Joshi declined to comment on a set of queries sent by Mint.

Yet another executive said there have been issues of non-payment of salaries to a majority of the employees.

“The company has also put on hold all the expansion work that it has proposed this year due to a severe liquidity crunch," said this executive, who also declined to be identified.

A slowdown in the domestic market, where wine sales declined in the past few months, has also contributed to the tight financial position in the company.

A July letter from Indage’s managing director Ranjit S. Chougule’s office to employees confirms payment defaults on salaries, wages and statutory dues. It said the firm has defaulted to suppliers, with arrears going as far back as three-six months.

The letter also said sales channels have nearly collapsed, resulting in collections lower than the cost of infrastructure created, and that borrowings from banks and through inter-corporate deposits have not been serviced properly.

Inter-corporate deposits are unsecured loans extended by one company to another. The rates are typically higher than market rates.

In the letter, which Mint has reviewed, Chougule said the firm has incurred huge costs, including disposal of his shares by creditors.

Representatives of at least 300 workers have approached the Maharashtra labour ministry seeking a dialogue with senior management.

According to at least two employees who met state labour minister Nawab Malik early this week seeking his intervention to resolve the issue, “financial mismanagement and short-sighted capital expenditure in the last couple of years resulted in a severe liquidity crunch in the company". The employees declined to be identified.

Indage’s slide is also illustrative of a growth strategy gone wrong. Indage, formerly known as Champagne Indage Ltd, acquired three wineries in Europe in less than a year between 2007 and 2008 for approximately Rs500 crore.

“These overseas buys had resulted in a huge financial trouble for the company as these acquisitions did not deliver the expected revenue and also due to some previous liabilities of these entities that was to be paid off by the company," said the executive who is leaving the firm.

In the fiscal year ended 31 March, the company diversified into the Indian-made foreign liquor business by launching at least three brands in the domestic market, and also created a new division for premium wines.

These two businesses, despite large capital infusions, could not help the company boost its revenue. Particulars of the investments in these new divisions are not available.

The company has not yet released its results for 2008-09.

Chougule, while announcing the firm’s latest acquisition in Australia in March last year, had said the winery would offer products at different price points within Australia as well as other major markets of Australian wine such as the UK, Europe, the US and India.

“These overseas acquisitions should be seen as part of a larger strategy of going global," he had said at the time.

In India, the company has vineyards on around 2,500 ha and wineries in Nashik, Maharashtra, and Himachal Pradesh with 20 varieties under commercial plantation and at least 137 varieties under nursery cultivation. It has at least 10 offices and around 700 employees globally.

Indage wanted to bring in additional investors through a preferential equity issue as well as diluting promoters’ stake to tide over the crisis, but was unsuccessful in doing so, said a person associated with a merchant banker that was involved in one of those discussions earlier this year. He, too, requested anonymity.