Can Kohinoor Foods survive flurry of insolvency petitions filed against it?
Can Kohinoor Foods survive the flurry insolvency proceedings initiated against it by both financial as well as operational creditors?
The finances of the company do not give much hope. On a consolidated basis, the company posted a loss of Rs 97.42 crore in 2020-21 compared to Rs 82.96 crore loss in 2019-20. The auditor has, however, said in its report that the loss is under-reported due to non-provisioning of interest on bank loans aggregating to Rs 235 crore from the date on which account became NPA.
Further no provision has been made towards penal interest, any other penalty etc. as may be charged by lenders. In the absence of complete statement of account from the bank, the above amount has been arrived as per calculation made by the company.
According to auditor’s report, during 019-20 the management of holding company had made an ad-hoc provision of Rs 53 crore for bad and doubtful debts on domestic debtors of rice on the ground that debtors were facing financial difficulties due to covid-19 situation. In current financial year, the management entered into settlement agreement with few debtors and on the basis of such settlement agreement and other estimation made by the management, the actual bad debts come out to be Rs 55 crore. The short provision of bad debts amounting to Rs 16 crore has been written off by the company during 2020-21.
Kohinoor Foods has entered into sale purchase agreement with Herba Foods SLU as on 07th of APril 2021 relating to sale of Indo-European Foods Limited, a UK based subsidiary company. The total consideration for said deal is GBP 4,376,725 (inclusive of deferred consideration of GBP 566,000). lt is the event after the reponing period, that provide evidence of conditions that existed at the end of reporting period. The company has adjusted its impact and recognised as impairment loss on investment by amounting of Rs 4.41 crore during the reporting period.
Both financial as well as operational creditors have filed insolvency petition against Kohinoor Foods. The lead consortium bank — Puniab National Bank erstwhile known as Oriental Bank of Commerce –has filed an application against company under section 7 of the Insolvency and Bankruptcy code, 2016 before National company Law Tribunal (NCLT) Chandigarh bench and the matter is adjourned to next date 11th August 2021.
Further, some operational creditors like Norton Rose Fulbright, Uma Polymers, International Cargo Terminal & Infrastructure (P) Ltd, International Cargo Terminal & Rail Infrastructure (P) Ltd and JPS Plastic have also filed an application against company under section 9 of the Insolvency and Bankruptcy code, 2015 before National company Law Tribunal {NCLT) Chandigarh bench. However, company has entered settlement agreement for above these operational creditors and said operational creditors have agreed to withdraw the application filed against the company before NCLT subject to realisation of their dues.
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