Key Transactions

Gini & Jony – Case Study:

Back-ground

Gini & Jony is India’s one of the leading brand & market-leaders in kids wear with and is engaged in manufacturing, distributing and retailing of branded kids wear and accessories, across various channels.

Situation

• Operating losses on account of high competition, elongated working capital cycle, debt accumulation, which thereby led to constrained liquidity and operating scale.
• Creeping rates of interest & rentals, leading to higher fixed outgo.
• Unviable stores and lower contribution from new products hurt the company’s bottom line and increased the leverage.
• Debt accumulation was significantly higher than underlying value of assets, as also, what could have been sustained from continuing operations. Further, cash-infusion was necessary to revive operations, both from brand and manufacturing standpoint.

Solution

• Identification of immediate liquidity infusion desired for continuing business operations.
• Arrangement of Equity from Ladderup’s prop book & co-investors including family offices of renowned BFSI promoters to the extent of Rs 100 crores

• Deferment of all term loans for a period of 2 years and ballooning repayment schedule after moratorium, apart from culling non-sustainable portion of debt.
• Rear-ended payment of interest on the portion of debt which wasn’t sustainable then.
• Reduction in rate of interest,
• Fresh term loan for de-bottlenecking and working capital ramp-up, linked to equity raise.

Operational Restructuring

• Renegotiated key terms with channel partners for a select group of stores
• Advised on to exiting stores that deemed unprofitable and cannot be turn around
• Control corporate overheads and conduct employee evaluation and rationalisation

Kisan Mouldings Ltd – Case Study:

Back-ground

Kisan Mouldings Ltd has been a prominent Western India based brand in plastic pipes and fittings, having a meaty presence in states of Maharashtra, Karnataka, Madhya Pradesh & Gujarat over the last 4 decades.

Situation

• The company undertook a massive expansion spree between 2010-2013, expanding in 4 new locations, leading to debt accumulation, repayments shrinking net-working capital and resultant liquidity situation.
• Volatility in base material cost led to reduction in operating margins. This was further compounded by systemic challenges in recovery of debtors on delays in receipt of government subsidy & slowdown in real-estate sector. The above situation led to erosion of NWC, leading to stunted capacity utilization, thereby incapability to service debt in 2013-14.

Solution

Ladderup management took-up a board representation in the company with a view to hand-hold the company over its recovery cycle. Key re-capitalization actions were:

• Partial conversion of cash credit limit in to WCTL to ramp up liquidity.
• Deferment of all term loans for a period of 2 years and ballooning repayment schedule after moratorium.
• Reduction in rate of interest,
• Fresh term loan for de-bottlenecking and working capital ramp-up

• Private Placement of fresh equity to the extent Rs 97 crores, including participation by Ladderup Finance Ltd to the extent of 10% of the issue size.

Operational Restructuring

• This was complimented with cost reduction by consolidation of manufacturing facilities from 9 locations to 5 locations, shifting of machines from closed locations so no reduction in production capacity of the company.
• Change in product mix: more focused on high profitable products
• Automation of plant & machinery that reduce loss of raw material as well as dependence on manpower.
• Centralization – management practices
• Centralized Inventory management and debtor management system, which help in reducing inventory and efficient debtor realization.
• Purchase department centralized to HO from individual factories to optimize on cost of purchases.
• The company realized around Rs. 12-15 crore from sale of assets (land) and utilized proceeds in repayment of overdue LC’s and other overdue creditors thus aid in shoring up its NWC.

Rajvee  – Case Study: 

Back-ground

The company is a diversified conglomerate based in Gujarat with key businesses including five star hospitality, real estate, logistics and ports.

Situation

• Hotel property owned by the group was cross-collateralized with working capital and corporate loans of another entity, in a special situation (Corp Guarantee invoked for a disputed PPP project)
• Un-entangling the cross-holdings and cross-collateralization for better succession planning & ring-fencing hotel property against unforeseen litigation.
• Recapitalization of group Company under special situation to create a war chest to address contingencies.
• Cyclicity in the hotel business on account of local factors to be accounted for.

Education  – Case Study: 

Back-ground

The company is a prominent education gropup in Western India, catering to pre school and K12 segment.

Situation

• The group had heavily invested in expanding its footprint in the pre-primary and K12 education businesses in Western India, to create a sizeable pre-school- K12 platform.
• While the mature part of the business was delivering sustained operating performance and cash-flows, it being a high-gestation business, the recent growth initiatives were consuming cash, leading to marginal profitability on a group-level.
• Ballooning maturities of term loans in next 2-3 years, in addition with repayment pressure from high cost privately raised debt nearing maturity, leading to prospective cash-flow issues.
• Further, the group needed to complete capex of on-going projects, which were at advanced stage of completion, and needed last-mile finance.
• Needed cost-effective solution for its cash-flow issues along with additional funds to complete capex.

Solution

• With matured businesses having demonstrated growing profitability, track-record of centres breaking even & an efficient business model, Ladderup pitched for refinance with additional funding aggregating to Rs.40 crore based on the cash-flow profile of the group.
• Since debt was parked in various group entities, a structure was derived to route cash-flow surpluses from cash-surplus parts to cash-deficient parts, along with cross-collateralized securities.
• Lender under-wrote a performing and growing education business with predictable cash-flows, sound collateral backing & promoter profile, while as promoter availed a curated solution matching his business’ cash-flow profile.

Logistics  – Case Study: 

Back-ground

The client is a leading integrated logistics player in Western India, having presence in 3PL, Cold-chain, ICDs, transport and allied services. It owns an asset heavy business with a block value > Rs.10 Bn, having demonstrated capabilities & established reputation.

Situation

• Promoter level debt at high-cost without commensurate cash-flows, used for share-holding consolidation in the past, leading to various cash-flow & regulatory issues. Regulatory risks necessitated realigning the debt to operating companies.
• Constrained lender appetite on account of recent policy changes in industry severely impacting industry volumes in a part of business.

Solution

• Worked with the company on re-aligning inter-company transactions, coming up with a full-proof re-financable structure facilitating consolidation of debt at operating companies having commensurate cash-flows.
• Identified key differentiators vis-à-vis industry peers, credit merits including reasoning for steady cash-flow profile & marketed the transaction to select group of potential investors having appetite for asset-backed annuity businesses.
• Solved lender concerns around COVID impact, relative soundness of businesses, ad sustainability of cash-flows.
• Placed in a structure which was not only cost-efficient, but was also significantly elongated, de-bottlenecking fresh-cash-flows for future expansion needs.
• Refinancing of existing debt of Rs.260 crore, with an additional raise of Rs.30 crore.