Financial Daily from THE HINDU group of publications
Thursday, Nov 13, 2003
BPL to raise $100 m from external borrowing for turnaround
Bangalore , Nov. 12
BPL Ltd, the beleaguered consumer durables conglomerate, is raising $100 million through external commercial borrowing (ECB) from a clutch of European financial institutions and banks at "attractive interest" rate.
According to top company sources, the company would receive the funds in two tranches of $60 million and $40 million each.
BPL expects to deploy the cash raised to replace the existing loans and for operational need. Infusion of new funds is expected to mark the company's turnaround.
The BPL stock gained momentum since August 1 trading session and rose to Rs 44.30 on the National Stock Exchange from Rs 34 as on July 1. However, the stock has since lost some value and closed at Rs 41.50 on Wednesday at the NSE.
"Once the money comes in and the market gets to know the identity of the overseas lenders for certain, there could be some further action on the scrip," a broker with a domestic brokerage said.
The funds would be used to repay some of the existing debts owed to local financial institutions and American Express. It is understood that ICICI, one of the top lenders to the company, is currently rescheduling its loans to BPL. Also, some of the financial institutions' debts to the company are likely to shrink as BPL partly pays off with the new funds, according to market sources.
The company is currently finalising a corporate debt restructuring exercise with the existing domestic creditors for re-bundling loans with reduced interest rate over a longer period or for one-time settlement.
Its debt burden is estimated at over Rs 1,200 crore, and efforts are on to bring it down to Rs 700 crore in three years. The ECB is expected to revitalise the company's production and marketing initiatives which suffered serious setbacks over the last 18 months due to the mounting debts and working capital crunch.
The company has been carved into four groups consumer durables business group, which will manage the main branded business such as CTVs, mobile phone handsets and other digital wireless products, electronics manufacturing services business group, which will perform the outsourced product design, manufacturing and assembly work for the companies, healthcare business group and soft energy business group.
The electronics manufacturing services business group already has outsourcing deals from multinationals such as Haier, Philips and a few prominent domestic brands.
BPL was hopeful of re-emerging as one of the top players in the "exciting entertainment and digital wireless communications" market, the top company source said.
It reiterated that an equity deal with Japan's Sanyo was on the cards, which would further bolster its financial and technological position. Sanyo was keener to invest into the television business, and not home appliances, the source also added.
Further, the company was actively pursuing strategic equity divestment in components and soft energy businesses, sources said.
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