COMPANY PRIVATE LIMITED

EXECUTIVE SUMMARY
Registered Office : Banglore
Constitution : Private Limited Company
Industry : Textile Industry
Activity : Manufacturing of Apparel and its Export
Present Credit facilities : Name of the Bank Rs. in Crore
with principal outstanding Canara Bank 146.19
IDBI Bank 32.62
HDFC 37.04
Edelweiss ARC (After OTS) 41.00
SBI (After OTS) 12.40
HSBC (After OTS) 9.40
Total Credit Facilities 278.65
Brief • Dealing into Outerwear, Skiwear, Men’s Suits and Women’s
Intimates having association with brands like Levis Strauss,
Nike, Oxford, GAP, Saralee and others, Company is pioneer in
the relevant category and brand.
• Company presently employs more than 6000 employees in its
six manufacturing plant with around 80% of the employees
being females.
• Contributions of Company have been well appreciated by the
industry people and it has been accredited with 21 prestigious
awards during last one decade itself.
• Promoters of the Company have been appointed on the board
of Governing Bodies of esteemed institutes such as India
Design Council, India US Business Council, Apparel Export
Promotion Council, Apparel Training & Design Centre and
National Institute of Fashion Technology.
• Company presently has its plant at six locations, operating at
below optimum capacity utilization.
• Company is into export of textiles and with global recession in
COMPANY PRIVATE LIMITED

2008-09, Company sustained huge losses in Forex Derivatives

and its financials were hugely affected. Company booked a
massive loss of Rs.96.19 Crore in FY 2009-10 and Rs.100.67
Crore in FY 2010-11 (18 months ending 30.09.2011).
• Extra-ordinary Losses of Rs.72.50 Crore were transferred to
group concerns by way of compensation on sale of land and
assignment of losses for non-performance of contract.
• Company could not recover from the massive hit on its
financials and without adequate working capital support and
breathing space to re-establish itself, Company has been
sustaining losses year on year basis.
• Company’s turnover which remained at more than Rs.500
Crore before a decade
• The CDR package also could not revive the situation on
account of erosion in working capital funds and huge debt
burden in comparison to sales of the Company.
• In fact, with sizeable debt of more than Rs.300.00 Crore (before
settlement with some of the banks it was around Rs.400.00
Crore) and turnover of even less than that and with inadequate
working capital funds, it is almost impossible for the Company
to repay entire debt in current situation.
Losses sustained by the : Year Losses in Crore
Company over the period 2009-10 96.19
excluding Extra-ordinary 2010-11 (Apr 10 to Sept 11) 100.67
items 2011-12 (Oct 11 to Sept 12) 12.40
2012-14 (Oct 12 to Mar 14) 37.11
2014-15 27.61
2015-16 34.63
2016-17 26.70
2017-18 (Upto December 2017) 25.10
Total Losses 360.41
* The Losses above excludes various losses transferred to group
concerns, presently being reflected as advances to group concerns
or as debtors of group concerns
* The Losses above does not consider interest payable to banks
after the account has been classified as NPA in the books of the
lenders
Proposed plan of action : • To overcome the situation, we have got our account
restructured under CDR mechanism.
• However, this has only led to increase in debt to more than
Rs.400.00 Crore and with our sales pattern even at optimum
COMPANY PRIVATE LIMITED

capacity utilization, we would not be able to meet the liability

in our entire lifecycle.
• To reduce the exposure, we have entered into one time
settlement with three of the lenders namely Edelweiss (Earlier
Exim Bank), SBI and HSBC.
• However, with present circumstances, we are not in a position
to even repay the settled amount and the same is overdue since
long.
• The Company has once been one of the most premium
companies in the apparel sector, however with mammoth losses
sustained by the Company on account of various external
factors, it has totally slipped out of our hands to revive the
Company at present level.
• Our financial inability to overcome the situation is now
affecting our operations and employee base.
• The turnover which was around Rs.500 Crore, a decade ago.
Our Company which once employed around 15000 employees
has now been reduced to the level of around 6000 employees.
• We believe it would be in the interest of the Company if we
dilute the equity of the Company, if available, to fund the
business or undertake sale of assets on going concern basis.
• We have thus started exploring the same and have approached a
number of PE funds and strategic investors.
Key issues in raising : • Even after one time settlement with Edelweiss (Earlier Exim
Fresh Funds Bank), SBI and HSBC, our exposure to the the bank / FI
amounts to Rs.314.28 Crore as on 31.12.2017 without accruing
the interest since the date, the account has been classified as
NPA.
• Excluding bank exposure, there are other creditors to the tune
of Rs.98.05 Crore which needs to be paid off, if investing in
this Company.
• Considering losses sustained by the Company over the years
and various non realizable assets
• With losses and OTS in the account, most of the prospective
investors are refraining from investing in our Company as an
equity investor.
• Most of the investors are interested in buying out the assets
along with compulsory liabilities such as statutory obligations,
employee dues, etc
COMPANY PRIVATE LIMITED

Business Valuation : • At the current business structure, none of the investors have
shown interest in investing equity in our Company.
• However a possibility for sale of assets on going concern basis
may be explored which would fetch maximum realizations to
the Company for payment of the dues to the lenders to the
maximum possible manner.
• Based on the response of various investors, we have
tentatively carried out a valuation of the Company within
which we can sale our business on going concern basis.
• Since we have been sustaining losses since last decade, any
valuations based on past operations would not fetch desired
results.
• Net asset method value will consider the net realizable value
of assets but may not consider brand value or business value of
the Company.
• Discounted Cash Flow method will give valuation considering
future business potential but does not take into account the
present market value of assets. Also for DCF, the expectation
of the promoters would be the key. In general, the expectation
of promoters would range from 15%-20% in such cases.
• According the business may be valued as under:
Particulars Business Key Net Value
Value Payments
Net Asset Method 101.94 46.35 55.59
DCF method @ 20% 120.83 46.35 74.48
DCF method @ 15% 164.79 46.35 118.44
Average Business 129.19 46.35 82.84
Valuation
• Thus the business would fetch around Rs.101.94 Crore on the
most conservative basis and Rs.164.79 Crore on optimistic
basis. The fair value would be around Rs.129.19 Crore.
• Considering key statutory / mandatory liabilities of Rs.46.35
Crore, Rs.55.59 Crore would be available for bankers on
conservative basis, Rs.118.44 Crore on optimistic basis and
average would be around Rs.82.84 Cr.
Brief about Proposed : • As stated above we have explored a number of PE investors
Investor and strategic investors for sale of assets on going concern
basis along with mandatory liabilities.
• It was noted that PE investors were rather interested in
investing only against available realizable assets.
• For strategic investors, we have approached a number of
medium to large sized textile players all across the country.
COMPANY PRIVATE LIMITED

• Investor should be investing Rs.150.00 Crore for purchase of

entire moveable as well as immovable assets which would
comprise of the following:
o Dues to the bankers of Rs.100.00 Crore
o Statutory / Mandatory payment of Rs.45.00 Crore
o Provision of Rs.5.00 Crore for other payments
• Investor should make provision of minimum Rs.30.00 Crore
for need based working capital.
• Investor will invest for the business would be around minimum
Rs.180.00 Crore against said fair value of Rs.129.19 Crore.
• The investor can propose to take statutory / mandatory payment
of Rs.45.00 Crore without which the plant cannot be run.
• Since the lenders are having charge over entire moveable as
well as immoveable assets, the investor has asked us to enter
into OTS with them and the payment to the bankers upto
Rs.100.00 Crore can be made directly by the investors to the
lenders.
• For all other dues related to unsecured creditors, Company will
enter into settlement with them, wherever required, and repay
through own sources or through additional promoters
contribution.
Present status of one time : • The Company has already entered into OTS with Edelweiss
settlement (Earlier Exim Bank), SBI and HSBC.
• Details of the same is as under:
Name of the Edelweiss SBI HSBC Total
Lender
Principal *83.72 90.71 23.33 197.76
OTS Amount *41.00 21.00 11.00 73.00
Outstanding 41.00 12.40 9.40 62.80
OTS since 31.03.14 30.09.16 31.08.17 -
OTS Date 29.07.15 29.11.16 11.09.17 -
OTS 31.10.21 31.03.18 25.09.17
COMPANY PRIVATE LIMITED

completion
date
NPV @ 12% 23.59 18.95 10.15 52.69
as on OTS
date
OTS to 28.18% 20.89% 43.51% 26.64%
principal %
at NPV value
* Excludes Rs.29.00 Crore which was realized through exclusive
security charged to Exim prior to CDR
• Although the account has been settled with aforesaid bank, the
Company at present is unable to repay the dues and the account
is overdue with all the above lenders.
• In the event of non-payment of their dues, their charge on assets
mortgaged / hypothecated will be available on the principal
value and not on settled value given as under:
Name of the Edelweiss SBI HSBC Total
Lender
Principal 83.72 90.71 23.33 197.76
Amount Paid 0.00 8.60 1.60 10.20
Net 83.72 82.11 21.73 187.56
principal
before OTS
• With support of new lender, Company is looking to repay
aforesaid bankers in one shot payment within 3 months of
approval i.e. by 30.09.2018 in following manner:
o Edelweiss – It has offered time period of 75 months with
residual 42 months. One shot payment of Rs.30.00 Crore
against outstanding of Rs.41.00 Crore considering its
current NPV value
o SBI - At outstanding Rs.12.40 Crore o
HSBC - At outstanding Rs.9.40 Crore
• Thus the OTS amount vis-à-vis principal amount would be as
under:
Name of the Edelweiss SBI HSBC Total
Lender
Principal 83.72 90.71 23.33 197.76
OTS 30.00 21.00 11.00 62.00
OTS to 35.83% 23.15% 47.15% 31.35%
Principal
ratio
• Overall OTS to principal outstanding ratio for the aforesaid
COMPANY PRIVATE LIMITED

settlement cases considering NPV value would be 26.64% and

considering above proposal of one shot payment would be
31.35%.
Security available to the : • With apparel export being working capital intensive in nature,
Lenders the debt entirely comprises of working capital limits.
• With losses sustained by the Company, entire working capital
limits of the Company have been eroded and net asset value of
the Company has turned into red.
• The market value of the securities available with the lenders
are as under:
Particulars Rs. In
Crore
First Factory Land and Building 34.03
report dated 02.08.2017
Factory Land and Building 6.55
their report dated 02.08.2017
Plant and Machinery 7.22
Leasehold Premises 0.00
Leasehold Premises 0.00
Inventory 41.41
Receivables 6.57
Total Realisable Assets 95.78
• Since all the lenders are having pari passu charge over entire
assets of the Company, securities above will be distributed
amongst lenders in their exposure ratio.
• Exposure of the bankers of each bank under consortium is as
under:
Particulars Principal % Security
Exposure
Edelweiss 83.72 21.93 21.00
State Bank of India 82.11 21.51 20.60
Canara Bank 146.19 38.30 36.69
IDBI 32.62 8.55 8.19
HDFC 37.04 9.71 9.30
Total Exposure 381.68 100.00 95.78
• Thus the realizable security is only Rs.95.78 Crore against
COMPANY PRIVATE LIMITED

exposure of Rs.381.68 Crore with security coverage of 25.09%

• Looking to the present situation of the Company, maximum
Rs.36.69 Crore would be available to Canara Bank.
Proposed Proposal : • Despite massive hit on our financials, we have made all our
efforts in reviving the Company.
• However with continuous erosion of working capital funds, we
are finding it difficult to revive the Company at current
position.
• To keep our turnover intact, we have been sourcing materials
at much higher cost. We have been discounting our
receivables through factoring. The cost of factoring is very
high and also we are losing on various export incentives.
• The key to revival is infusion of working capital funds and
reduction in debt size.
• Accordingly we propose sale of asset as stated above.
• Considering key statutory / mandatory liabilities of Rs.46.35
Crore, Rs.55.59 Crore would be available for bankers on
conservative basis, Rs.118.44 Crore on optimistic basis and
average would be around Rs.82.84 Crore.
• Since the proposed investor is into the field of textile and the
proposed investment would result into forward integration to
him, the prospective investor has agreed to invest a sum of
Rs.150.00 towards purchase of entire assets. He will be
infusing working capital on its own without any reference to
the lenders.
• As stated above, keeping aside Rs.50.00 Crore for employee
dues and other payments, he has shown interest in settlement
of dues of the bankers at Rs.100.00 Crore.
• Looking to the position of the Company, Edelweiss, SBI and
HSBC have already settled the dues at Rs.73.00 Crore with
outstanding of Rs.62.80 Crore.
• We propose to give an offer to Edelweiss for settlement of
their dues at Rs.30.00 Crore considering present NPV.
• Considering the same, dues of three banks would be settled
with Rs.62.00 Crore against principal value of Rs._____ Crore
at OTS to principal value of 31.35%. The outstanding herein is
Rs.51.80 Crore.
• HDFC Bank has earlier even given oral confirmation for
settlement of dues.
• Presently the lenders are having realizable security coverage
of only 25.09%, which also is gradually declining looking to
further deterioration of the health of the Company.
COMPANY PRIVATE LIMITED

• At the same time, the investor is ready to pay maximum of

Rs.100.00 Crore towards settlement of dues.
• In view of the above, the Company proposes for settlement of
all the balance lenders at one time settlement of 30.00%.
• The principal and OTS amount thus would be as under:
Particulars Principal Settlement Value
Exposure %
Canara Bank 146.19 30.00% 43.86
IDBI 32.62 30.00% 9.79
HDFC 37.04 30.00% 11.11
Total Exposure 215.85 64.76
• Considering other claims, the settlement value to be paid for the
Company would be as under:
Particulars Principal OTS O/s to be
Exposure Value Paid
Edelweiss 83.72 30.00 30.00
State Bank of India 82.11 21.00 12.40
HSBC 23.33 11.00 9.40
Canara Bank 146.19 43.86 43.86
IDBI 32.62 9.79 9.79
HDFC 37.04 11.11 11.11
Total Exposure 405.01 137.76 116.56
• Of Rs.116.56 Crore, Rs.100.00 Crore will be paid by the
proposed investors and balance Rs.16.56 Crore by the current
promoters by liquidating their personal worth of Rs.5.93
Crore, to the extent possible and by borrowing from the
market.
Key points of proposed • Settlement of dues of Canara Bank at 30% of the principal
scheme value i.e. at Rs.43.86 Crore.
• Rs.2.50 Crore to be deposited in No Lien Account by the
investor on issuance of in principal approval.
• Balance Rs.41.36 Crore will be paid within 3 months of
issuance of In Principal Approval after completion of due
diligence by the investor (After receipt of Final approval
letter)
COMPANY PRIVATE LIMITED

Business Valuation

1) Net Asset Value for buyout of only realizable assets and mandatory liabilities (Based on
Valuation as on 31.12.2017)

Realisable Assets
Particulars Book Realisable
Value Value
Fixed Assets
- Factory Land and Building 10.96 34.03
- Factory Land and Building at 6.55
- Plant and Machinery 9.02 7.22
Current Assets 0
- Inventory 57.50 41.41
- Sundry Debtors 101.82 6.57
- Cash and Bank Balance 4.73 4.73
- Employee related advance 2.26 1.13
- Other Current Assets 0.63 0.30
Total Realisable Assets 186.92 101.94

Mandatory Liabilities
Particulars Book Realisable
Value Value
- Statutory Dues 18.27 18.27
- Employee Related 11.49 11.49
- Employee Benefit 16.59 16.59
- Total 46.35 46.35

Net Asset Value

Particulars Book Realisable
Value Value
Current Assets 186.92 101.94
Current Liabilities 46.35 46.35
Total 140.57 55.59
COMPANY PRIVATE LIMITED

2) Discounted Cash Flow Method

Shareholders Expectation: 15%

Doscounting Factor 15.00%

Particulars 2020 2021 2022 2023
Sales 250 300 360 432
EBDIT Margin % 5.00 5.00 5.00 5.00
EBDIT 12.50 15.00 18.00 21.60
Discounting Factor 1.00 0.87 0.76 0.66
Weightage 12.50 13.04 13.61 14.20
Present Value of Explicit Value (A) 53.36

Terminal Value
Terminal Cash Flow 21.60
Cost of Capital 15.00%
Growth 2.00%
Terminal Value 169.48
PV of Terminal Value (B) 111.43

Valuation
Present Value of Explicit Period (A) 53.36
Add: Terminal Period value (B) 111.43
Business Value 164.79
COMPANY PRIVATE LIMITED

Shareholders Expectation: 20%

Doscounting Factor 20.00%
Particulars 2020 2021 2022 2023
Sales 250 300 360 432
EBDIT Margin % 5.00 5.00 5.00 5.00
EBDIT 12.50 15.00 18.00 21.60
Discounting Factor 1.00 0.83 0.69 0.58
Weightage 12.50 12.50 12.50 12.50
Present Value of Explicit Value (A) 50.00

Terminal Value
Terminal Cash Flow 21.60
Cost of Capital 20.00%
Growth 2.00%
Terminal Value 122.40
PV of Terminal Value (B) 70.83

Valuation
Present Value of Explicit Period (A) 50.00
Add: Terminal Period value (B) 70.83
Business Value 120.83
COMPANY PRIVATE LIMITED

Realisable Assets as on 31.12.2017

Particulars Book Realisable Remarks

Value Value
Fixed Assets
- Factory Land and Building 10.96 34.03 As per valuation report
report dated 02.08.2017
- Factory Land and Building 6.55 As per valuation
report dated 02.08.2017
- Plant and Machinery 9.02 7.22 80% of WDV as on
31.03.2017.
- Office Equipments 0.30 0.00 Hardly Realizable
- Furniture and Fixtures 0.21 0.00 Hardly Realizable
- Vehicles 0.02 0.00 Hardly Realizable
- Computer 0.13 0.00 Hardly Realizable
- Leasehold Premises 0.01 0.00 Lease Expired

- Leasehold Premises 0.00 Lease Expired

- Difference (5.81) 0.00

- Total 14.84 47.80
Non Current Assets
- Investment in Share 8.32 0.00 The investment was made
Application of M/s Company more than 10 years earlier by
Inc, USA promoting M/s Company
Inc, USA as wholly
Owned Subsidiary of the
Company to manage export
business of the Company in
USA. With operating losses
sustained by the subsidiary to
fund the operations of parent
Company, the net worth of the
subsidiary has turned red and
the investments are hardly
recoverable.
- Lease, Electrical and Other 33.07 0.00 Lease deposit of Rs.____
Deposit pertains to expired leases and
hence not recoverable.

Liquidation of other Deposits

COMPANY PRIVATE LIMITED

such as __________ will affect

going concern of the Company
and hence not realizable.
- Loans and Advances to 145.03 0.00 Pertains to transfer of foreign
related parties currency losses of the
Company in FY 2008-09 to
third party and is outstanding
since then and are not
recoverable.
- Other Loans and Advances 22.69 0.00 Pertains to long recovery from
third parties and is doubtful
- Total 209.11 0.00
Current Assets
- Inventory 57.50 41.41 Comprises of non-realisable
old and obsolete stock of
Rs.18.28 Crore as per Stock
Audit Report of Mr. B. Ashok,
Chartered Accountant
- Trade Receivables 101.82 6.57 Realisable Book Debts upto
cover period as Stock Audit
Report
Chartered Accountant. As per
(Balance Sheet as on
31.12.2017, debtors upto six
months is only Rs.3.03 Crore.)
(Rs.88.39 Crore is due from
related parties and are shown
as un-realisable. Kindly
confirm)
- Cash and Cash Equivalent 4.73 4.73 Realisable in Full
- Advances to Suppliers 10.64 0.00 The amount pertains to various
debit notes and other claims
put by the Company. The same
will be adjusted by the supplier
against their dues.
- Prepaid Expenses 0.03 0.00 To be written off
- Employee Related 2.26 1.13 50% of the dues are likely to
be adjusted against employee’s
claims. Balance is likely to be
adjusted against outstanding
payable
- Advance Tax and FBT refund 2.80 0.00 Pending for assessment and is
receivable likely to be forfeited against
COMPANY PRIVATE LIMITED

claims of department
- Interest Dispute 2.09 0.00 Under dispute and not
recoverable
- LC devolved 0.42 0.00 Will be adjusted against
overdue outstanding
- Others 0.63 0.30 Partly realisable
- Duty drawback receivable 5.59 0.00 Pending against past claims
and any realisability in near
future is doubtful
- GST receivable 4.56 0.00 To be adjusted against GST
payable. However with low
conversion cost and same GST
rate on input and output
material, the same are not
recoverable in near future.
- Total 193.07 54.14
TOTAL ASSETS 422.83 101.94

Total Liabilities as on 31.12.2017

Particulars Book Principal Remarks
Value Payable
Amount
Bank Dues
- Long Term Borrowings 99.24 Bank wise
- Short Term Borrowings 72.28 detailed as
- Current Maturities / Overdue 85.52 under
- Interest Accrued and Due 21.98
- Book Overdraft 22.65
- Canara Bank 0.00 146.19 As submitted by Company
- IDBI Bank 0.00 32.62 As submitted by Company
(Principal as per charge
documents Rs.28.58 Crore)
- Edelweiss ARC 0.00 41.00 As submitted by Company
- SBI 0.00 12.40 As submitted by Company
- HSBC 0.00 9.40 As submitted by Company
- HDFC 0.00 37.04 As submitted by Company
Total 301.67 278.65
Bank Dues – Bill Discounted
Statutory / Mandatory
Liabilities
- Statutory Dues 18.27 18.27 Various statutory dues
compulsory for running
COMPANY PRIVATE LIMITED

operations
- Employee Related 11.49 11.49 Compulsory to retain
- Employee Benefit 16.59 16.59 employees
- Total 46.35 46.35
Other Liabilities
- Trade Creditors 25.37 25.37
- Security Deposits 10.41 10.41
- Advance from customers 4.92 4.92 Will be adjusted against
supplies to them
- Service Providers 7.25 7.25
- Accrued Expenses 3.75 3.75
- Total 51.70 51.70
TOTAL LIABILITIES 399.72 376.70

Net Current Assets as on 31.12.2017

Particulars Book Principal Remarks
Value Payable
Amount
Total Assets 422.83 101.94
Total Liabilities 399.72 376.70 Excl Shareholders Funds, UL
from directors and interest on
loan
Net Current Assets 23.11 -274.76