B&E ‘s savreen gadhoke writes on why Subhiksha and Vishal Retail may not meet the same finality, although their operational and financial fallibility is eerily similar...
“Speaking of Vishal Retail in the same plane as Subhiksha will not be correct. The fact is that while Subhiksha’s plea for a Corporate Debt Restructuring (CDR) programme was rejected by the authorities, Vishal Retail has been granted CDR approval will reinstate investor confidence,” says Rajesh Tanwar, Director, Integrated Retail Solutions. But still, despite the fact that Vishal Retail has gotten the CDR approval, it does need funds for the running expenses to ensure the smooth functioning of its stores. And that’s where the promoters might find their hands totally tied. “Absolutely not. We are a running company with Rs.100 crore turnover month-on-month. All our statutory dues have been taken care off and we have no pending dues being carried forward to the next month. The only pressure on us is the high finance cost and that too we’re addressing through the CDR route. Otherwise also, we are taking all the requisite measures to bring down our expenses,” says Khemka. Vishal Retail also communicates to us that the demand of the EPFO notice is completely not justified – one reason they’re contesting the same in the courts – as “everywhere in the world, PF is a percentage of employee’s basic pay only; it is not that they’ll demand Rs.11 crores and we’ll pay to them.”
To be fair, to say that Vishal Retail is lost in the woods would be close to an exaggeration. In fact, they are trying hard on many fronts. Amongst the various steps taken to repay debt, one that is currently being contemplated by Vishal Retail is the merger of Vishal Water World with Vishal Retail. Vishal Water World is a profit-making company with Rs.40 crores in reserve surplus and additional land assets of Rs.60 crore. The merger will benefit Vishal Retail in two ways.
Firstly, by the sale of the land, the debt of Vishal Retail can be brought down. Secondly, there would be considerable group tax benefits by merging a profit-making entity with a loss making one. It will take a minimum of six months for the merger to be completed as the process has to be validated by the court and stakeholders.
“Speaking of Vishal Retail in the same plane as Subhiksha will not be correct. The fact is that while Subhiksha’s plea for a Corporate Debt Restructuring (CDR) programme was rejected by the authorities, Vishal Retail has been granted CDR approval will reinstate investor confidence,” says Rajesh Tanwar, Director, Integrated Retail Solutions. But still, despite the fact that Vishal Retail has gotten the CDR approval, it does need funds for the running expenses to ensure the smooth functioning of its stores. And that’s where the promoters might find their hands totally tied. “Absolutely not. We are a running company with Rs.100 crore turnover month-on-month. All our statutory dues have been taken care off and we have no pending dues being carried forward to the next month. The only pressure on us is the high finance cost and that too we’re addressing through the CDR route. Otherwise also, we are taking all the requisite measures to bring down our expenses,” says Khemka. Vishal Retail also communicates to us that the demand of the EPFO notice is completely not justified – one reason they’re contesting the same in the courts – as “everywhere in the world, PF is a percentage of employee’s basic pay only; it is not that they’ll demand Rs.11 crores and we’ll pay to them.”
To be fair, to say that Vishal Retail is lost in the woods would be close to an exaggeration. In fact, they are trying hard on many fronts. Amongst the various steps taken to repay debt, one that is currently being contemplated by Vishal Retail is the merger of Vishal Water World with Vishal Retail. Vishal Water World is a profit-making company with Rs.40 crores in reserve surplus and additional land assets of Rs.60 crore. The merger will benefit Vishal Retail in two ways.
Firstly, by the sale of the land, the debt of Vishal Retail can be brought down. Secondly, there would be considerable group tax benefits by merging a profit-making entity with a loss making one. It will take a minimum of six months for the merger to be completed as the process has to be validated by the court and stakeholders.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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