Birla Tyres in insolvency court after failing to pay Rs 16 crore to vendor SRF Ltd
Birla Tyres, a part of the famous BK Birla Group of Companies and Kesoram Industries Ltd, will now face insolvency proceedings after the Kolkata bench of the National Company Law Tribunal (NCLT) admitted an insolvency application against the company by SRF Ltd.
The Birla group company defaulted on payment of Rs 15.84 crore amount due to SRF Ltd for supply of Tire Cord Fabric. Out of the Rs 15.84 crore total dues, Rs 10.06 crore is the principal amount and the rest Rs 5.78 crore is interest at an annual rate of 24%.
The amount due is related to supplies made in 2018-19.
The application for insolvency first came up for hearing in October 2021, after which the NCLT sent a notice to Birla Tyres. The matter came up again in December 2021, when the Counsel representing Birla Tyres sought three weeks to file an affidavit in the matter. When the matter came up again in February 2022, the corporate debtor was granted another two weeks for filing response.
When the matter came up for hearing again on 5 April 2022, the lead counsel of Birla Tyres sought more time for filing a response to the petition citing ongoing workers agitation preventing them from accessing documents and records necessary for filing affidavit.
When the NCLT refused to grant further time, Birla Tyres did file an affidavit saying that it is working on a scheme of arrangement for reconstruction and compromise with the creditors.
It sought more time to file supplementary affidavit, which the NCLT declined. The tribunal also satisfied beyond doubt the occurrence of default, and non-existence of any dispute regarding the same.
Birla Tyres, a listed entity, was established in 1991 as part of Kesoram Industries Limited, initially collaborating in the production and development of its tyres with world-class tyre manufacturer Pirelli.
The Company has incurred losses during the previous periods/years and has continued to incur losses during the current year, primarily due to lower sales volume and finance costs which have resulted in erosion in net worth as at 31 March 2022.
Birla Tyres reported losses to the tune of Rs 655 crore in 2021-22, up from Rs 284 crore in 2020-21. Its revenue also fell from Rs 163 crore in 2020-21 to Rs 22 crore in 2021-22.
The total debt of the company including interest accrued as at 31 March 2022 amounts to Rs. 1,138 crore.
The company has defaulted in repayment of term loans, letter of credit, working capital facilities, and related interest payable to lenders and has not complied with financial debt covenants. The default under term loans and working capital facilities along with the accrued interest thereon gives right to the lenders to recall these facilities immediately, necessitating the Company to reclassify such term loans as current liabilities.
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