KKR-backed dairy major Kwality Ltd set to be taken to National Company Law Tribunal (NCLT) over Rs 12 billion loan default. According to a report published in Hindu Businessline, the Kolkata-headquartered company has been taken to the tribunal by a leading foreign bank that will be joined by others soon after the case is filed, on October 16.
According to sources, Kwality has debt of about 20 billion, of which 80 per cent has gone bad following poor business decisions, reported The Hindu Businessline.
Earlier on, the company in a BSE filing said there was no strategically significant development within the organisation and business. Kwality’s sales and profits have also been declining at a time when its peers — such as Parag Milk Foods and Prabhat Diary — have been growing their businesses.
Its net profit saw a steep fall to Rs 10.4 million during the first quarter of 2018-19 fiscal on poor sales.
Net profit during April-June 2017-18 stood at Rs 278.7 million and the net income declined to Rs 12.6578 billion from Rs 15.7318 billion in the year-ago period.
Stock erosion
Kwality’s stock has also been eroding for quite some time, hitting the lower circuit everyday for the past three months. In Tuesday’s trade, Kwality’s stocks were 5 per cent down intraday.
What led to crisis at Kwality
According to the firm, Kwality’s woes began when it could not service customers with the required goods due to liquidity crunch, a situation that emerged primarily towards the end of the quarter triggered due to non-disbursement of sanctioned working capital from banking partners. This impacted the company’s plans to monetise its investment already made on setting up of a new facility dedicated for high margin value-added products.
Further, considering significant delays in recovery of receivable balances, the lenders proposed forensic audit.
In July, Kwality board of directors decided to close business operations of Kwality Dairy Products FZE Dubai- UAE (A wholly owned Subsidiary) of the Company in phased manner. In the same month, Sidhant Gupta, non-executive director resigned from his post.
Kwality Ltd is a processor and producer of various types of dairy products including milk, ghee, butter, milk powder, curd, yogurt and cheese under the brand ‘Dairy Best’.
Source: Business-Standard