Clipped from: https://economictimes.indiatimes.com/industry/indl-goods/svs/engineering/two-top-lenders-file-petitions-against-mcnally-bharat-in-nclt/articleshow/82055213.cms?utm_source=ETTopNews&utm_medium=HPTN&utm_campaign=AL1&utm_content=23Synopsis
A consortium of banks that include public sector lenders, private sector banks and foreign banks are owed around ₹4,000 crore by the company. The dues comprise both long term and short term loans as well as non-fund based facilities such as letters of credit and bank guarantees.
Engineering, procurement and construction companyMcNally BharatNSE -2.03 % Engineering is facing an Insolvency and Bankruptcy Code (IBC) test as two major financial creditors, Bank of India andCanara BankNSE 3.90 %, have lodged petitions at NCLT to trigger insolvency proceedings against the company, as per court filings.
A consortium of banks that include public sector lenders, private sector banks and foreign banks are owed around ₹4,000 crore by the company. The dues comprise both long term and short term loans as well as non-fund based facilities such as letters of credit and bank guarantees provided to the company against which it received goods or won tenders. Bank of India is the consortium leader.
McNally Bharat is a listed subsidiary of Williamson Magor Group, the flagship of Brij Mohan Khaitan Group that also owned Eveready Industries and McLeod Russel, a leading tea producer. The Kolkata-based Williamson Magor acts as a sort of family holding company that traces its roots back to the mid-19th century. McLeod Russel is already in the bankruptcy court.
“We have put up a restructuring plan, which is under consideration by the lenders,” said Srinivas Singh, managing director, McNally Bharat Engineering. “A consultant has been appointed for a TEV (techno-economic viability) study. We are hopeful that the plan will be accepted by the lenders. I must admit that Covid has been a bit of a setback for us.”
McNally Bharat had succeeded in fending off a similar threat of bankruptcy proceedings in 2019 when Tata Capital dragged it to NCLT. Tata Capital’s application was rejected at the time. The company posted sales of ₹600 crore in 2019-20. It reported a loss of ₹300 crore.
The Khaitan’s financial woes are linked to the distress at McNally Bharat Engineering, which appears to have outstretched its resources and ultimately borrowed funds from group companies through inter-corporate deposits (ICDs).