'Dairy Best' Co. Kwality Ltd Set To Be Taken To NCLT Over Rs. 1,200-Crore Default

Published on 16 Oct 2018 by Shivi

Dairy major Kwality Ltd is set to be dragged to the National Company Law Tribunal (NCLT) on loan default of over ?1,200 crore.

According to sources, 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.

Kwality Ltd is a processor and producer of various types of dairy products including milk, ghee, butter, milk powder, curd, yoghurt and cheese under the brand ‘Dairy Best’.

The company has established a procurement network which comprises 3,50,000 farmer families across 4,700 villages in North India. It has six plants, in Haryana, Uttar Pradesh and Rajasthan, with a processing capacity of 3.4 million litres of milk per day.

According to banking sources, Kwality has a debt of about ?2,000 crore, of which 80 per cent has gone bad following poor business decisions. The BSE-listed company’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.

READ: Corporate Insolvency Resolution Process (CIRP) Under IBC, 2016

The company has also been facing issues in raising fresh capital in the last few months that has further restricted its expansion plans.

During FY18, its net profit stood at ?71 crore, against ?164 crore a year ago. Revenues grew marginally to ?6,724 crore in FY18 from ?6,131 crore a year ago.

A mail to Kwality Ltd’s promoter and Managing Director Sanjay Dhingra remained unanswered.

Kwality is backed by US-based private equity firm KKR & Co that made a ?520-crore debt and equity investment in 2016. Sources said KKR, which holds an about 20 per cent stake in Kwality, is not keen on pumping in any fresh capital into the company.

Kwality’s stock has also been eroding for quite some time, hitting the lower circuit every day for the past three months. It closed at ?10.85 on Monday with a full market cap of ?262 crore, down almost 10 times from ?2,879.80 crore a year ago on the BSE.

Brickwork Ratings recently downgraded Kwality’s short-term rating of bank loan facilities to D from BBB minus. It also said in its report that some banks have received income-tax attachment orders due to Kwality defaulting in meeting statutory commitments.

SOURCE

Tags: Insolvency And Bankruptcy 

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