Debt Restructuring

Debt restructuring is a method used by companies with outstanding debt obligations to alter the
terms of the debt agreements in order to achieve some advantage. Companies use debt
restructuring to avoid default on existing debt or to take advantage of a lower interest rate. A
company will often issue callable bonds to allow them to readily restructure debt in the future.
The existing debt is called and then replaced with new debt at a lower interest rate. Companies
can also restructure their debt by altering the terms and provisions of the existing debt issue

There can be many benefits to Debt Restructuring including renegotiating the terms of the debt
agreements in order to achieve a mutual benefit between the business and its creditors. Working
with a professional debt restructuring agent, such as Corporate Turnaround, offers your business
specific benefits including help with:

 Satisfying creditors based on what you can afford.

 Paying down as little as 2% of your total debts each month

 Reducing your debt and stretching it out over time

 Converting overwhelming debt obligations into manageable and affordable monthly

payments

 Spending less time dealing with creditors, collection agencies and attorneys where your
debt restructuring agent handles negotiations with applicable relationships

 Reducing or eliminating associated legal costs

 Balancing your budget and managing your cash flow

 Rebuilding your credit and credibility

 Keeping your doors open and avoiding bankruptcy

Subhiksha
In the year 1997, Subhiksha opened its first store at Thiruvanmiyoor in Chennai with an

investment of around Rs 4-5 lakh, with the theme,” why pay more when you can get it for

less at Subhiksha”

Subhiksha’s USP :

Offering the branded goods at a lower price than their competitors Which couldmake

them stand in the competitive retail industry.

Subhiksha’s turnover grew from Rs 330 crore in 2005-06 to Rs 833 crore in 2006-07, and
then to Rs 2,305 crore in 2007-08 (year ending March 31, 2008). Likewise, having grown from
150 stores in September, 2006 in Tamilnadu to 1,600-odd stores across the country in September,
2008, Subhiksha has been the envy of its competitors. By the end of this year, it was looking at
grossing a turnover of Rs 4,300 crore from 2,300 stores.

"We were facing a lot of difficulty in accessing data across different regions using this local
solution," concurs Ankur Saigal, vice president (Tech Initiative), Subhiksha Trading Services.
"Besides business expansion brings its own complexities and we needed a robust platform to
streamline our operations and control."

Furthermore, the company needed a solution to manage the payroll system. Although it didn't
have any HR issues at the ground level, sending the payroll to employees on time was getting
difficult. The system worked manually, with a central team taking care of running 2-3 payroll
systems in a month depending on the availability of the band width and the entire process

The first and big mistake committed by the management of Subhiksha is expanding the number of
stores rapidly without sufficient funds in hand. They thought of raising equity during last
September but the things had gone too far before they woke up. The global markets had started
collapsing and there were no possible chances of raising funds

Subhiksha Trading Services has come under fire from television channels for not

clearing advertising dues that run around Rs 8 crore.

Subhiksha is believed to owe Rs 35 crore against goods, Rs 18 crore against wages, and Rs 20
crore against lease rents. The company, according to the report, is also carrying a debt of Rs 700
crore at an average interest cost of 12 per cent per annum.

3.Expansion of Stores without adequate system control and IT Support. That’s why

there was a huge Audit and abnormal losses in the system

Recovery:

Subhiksha, which was forced to shut all its stores as it ran out of cash, is in talks with over ten
banks to restructure loans of nearly Rs 750 crore through a CDR (corporate debt restructuring)
exercise. Its promoter R Subramanian has said that the company can resume operations after it
gets cash of Rs 300 crore.

In all, 13 banks have cumulatively lent Rs 750 crore to the company. The banks that are part of
the restructuring include ABN AMRO Bank (Rs 50 crore), Bank of Baroda (Rs75 crore),
Centurion Bank of Punjab (Rs 40 crore), Development Credit Bank (Rs 25 crore), Federal Bank
(Rs 50 crore), HDFC Bank (Rs 65 crore), ICICI Bank (Rs 155 crore), Standard Chartered Bank
(Rs 25 crore), The Hongkong and Shanghai Banking Corporation (Rs 85 crore) and Yes Bank (Rs
50 crore)

Cholamandalam DBS Finance Limited (CDFL)

Cholamandalam DBS is a pan-Indian, composite financial services provider. It comprises the

parent company, Cholamandalam DBS Finance Limited (CDFL), and its subsidiaries and
associates DBS Cholamandalam Distribution Limited, DBS Cholamandalam Securities Limited.
The shares of CDFL are listed in the Madras (MSE), Mumbai (BSE) and National (NSE) Stock
Exchanges.

Cholamandalam Investment & Finance Company Limited (CIFCL) was incorporated in 1978 as
the financial services arm of the Murugappa Group. In 2005, post the joint venture partnership
between the Murugappa Group and DBS Bank Limited, Singapore, the Company was renamed as
Cholamandalam DBS Finance Limited (CDFL). The Company that commenced business as an
equipment financing company has now emerged as a comprehensive financial services solution
provider that offers vehicle finance, business finance, home equity loans, mutual funds, stock
broking and distribution of financial products to its customers. The Company operates from over
140 branches across India with an asset under management of about Rs.8546 Crores. The
subsidiaries of Cholamandalam DBS include DBS Cholamandalam Securities Limited (DCsec)
and DBS Cholamandalam Distribution Limited (DCDL).

The major issues prevailed in Cholamandalam DBS Finance Ltd are Poor liquidity, Increase in
cost of funds, Reduction in the volume of business, Reduction in corporate mortgage finance
portfolio and Challenging economic environment.

Need for capital restructuring: Net loss of Rs.27.73 crores for the three months ended

December 31, 2008 as compared to the net profit of Rs. 20.25 Cr last year. Along with this it had
ti infuse equity (Rs.300 Cr). More over CRISIL ratings had gone down from FAA+ to FAA.
Profit before tax (PBT) had gone down compared to 2008 which lead to drop in earnings per
share (EPS). Dividend was not paid for the year 2008 financial year. There was drop in the capital
adequacy ratio from 15% to 12%.

The approval procedure: Cholamandalam followed the formalities for capital restructuring. For this
it got approval from Shareholders on March 5, 2009. Then later it got approval on 20th April
under section 78,100 to103 of “The Companies act”,1956. Finally the bank had gone restructured
on May 11, 2009.

The changes: The changes that happened due to capital restructuring are

Capital Reduction - The special provision of Rs. 323.53 Cr is made .To make provision for the
standard assets, for an amount not exceeding Rs. 200Cr. To write off the bad debts/loan
losses/other non recoverable assets, for an amount not exceeding Rs. 100 Cr. Provision for the
doubtful receivables, for an amount not exceeding Rs. 23.53 Cr.

Infuse a capital of Rs. 300 Cr, in the form of fully convertible cumulative preference shares. The
bank exited from personal loan business. The bank concentrated more on vehicle financing, home
equity, corporate mortgage.

The company could get back to normal disbursement in the last quarter of the financial result. The
liquidity position has substantially improved. In near future bank can improve the credit rating
and can come back to its original rating ie., before debt restructuring occurred. The bank can
constantly enhance shareholders’ value. In future profitability will be increasing along with the
earnings per share value.
Hindalco

Hindalco Industries is India's largest Aluminum manufacturing Company and is a subsidiary of

the Aditya Birla Group. It is run by one of the world's youngest billionaires, Mr. K.M. Birla. The
company has annual sales of $ 5 billion and employs 13,675 people and is listed on Forbes 2000.
A metals powerhouse with a turnover of US$ 14 billion, Hindalco is the world's largest
aluminium rolling company and one of the biggest producers of primary aluminium in Asia.

Hindalco Industries' shares slipped 3.06%,during February 2009. Hindalco had acquired Canadian
aluminium product maker Novelis for $5.9 billion in 2007 in an all-cash transaction, which also
included a debt of $2.4 billion.

The company also had plans to invest Rs 14,800 crore in brownfield and greenfield

expansions, which it proposes to fund through debt and inter-nal accruals.

“Credit to the business reconstruction reserve account shall not exceed the balance lying

to the credit of the securities premium account of the company as on December 31,

2008,” Hindalco said.

Hindalco has $1.8 billion in its share premium reserve. The aforesaid exercise will be

implemented under relevant provisions of the Companies Act, 1956 and other laws.

LME Aluminium prices have averaged $1,828/tonne, lower by 25% year-on-year during the
quarter. However, prices corrected significantly in December and January 2008, which will reflect
in lower realisations for Hindalco, going forward.

Tata Motors

Tata Motors Limited is a multinational corporation headquartered in Mumbai, India. Part of the
Tata Group, it was formerly known as TELCO (TATA Engineering and Locomotive Company).
Tata Motors has consolidated revenue of USD 16 billion after the acquisition of British
automotive brands Jaguar and Land Rover in 2008.

It is India's largest company in the automobile and commercial vehicle sector with upwards of
70% cumulative Market share in the Domestic Commercial vehicle segment, and a midsized
player on the world market with 0.81% market share in 2007 according to OICA data. The OICA
ranked it as the 19th largest automaker,[1] based on figures for 2007.[2] and the second largest
manufacturer of commercial vehicles in the

world. The company is the world’s fourth largest truck manufacturer, and the world’s

second largest bus manufacturer. In India, Tata ranks as the leader in every commercial vehicle
segment, and is in the top 3 makers of passenger cars. Tata Motors is also the designer and
manufacturer of the iconic Tata Nano, which at INR 100,000 or approximately USD 2300, is the
cheapest car in the world.
Established in 1945, when the company began manufacturing locomotives, the company
manufactured its first commercial vehicle in 1954 in collaboration with Daimler-Benz AG, which
ended in 1969.[3] Tata Motors is a dual-listed company traded on both the Bombay Stock
Exchange, as well as on the New York Stock Exchange. Tata Motors in 2005, was ranked among
the top 10 corporations in India with an annual revenue exceeding INR 320 billion.

In 2003, it was newly rechristened Tata Motors has decided to utilise the entire $100 million it
raised through the issue of foreign currency convertible bonds last month to retire its high-cost
debts. With this move, the company hoped to retire at least Rs 400-

500 crore (Rs 4-5 billion) of its expensive debt.

The automobile maker was earlier contemplating utilising the funds for capital infusion, product
development and retiring high-cost debts but has finally decided on using the entire amount for
debt restructuring.

Praveen Kadle, executive director, Tata Motors, said that they utilised the $100 million raised
through the FCCB issue to bring down the effective yield of our high- cost debt component to 4
per cent, while the average cost of our debt at present is around 12-13 per cent."

The company managed to bring down its loans, both secured and unsecured, from Rs 2,304.96
crore (Rs 23.05 billion) to Rs 1,458.31 crore (Rs 14.58 billion) in the last fiscal. It also managed
to retire Rs 150 crore (Rs 1.50 billion) of high-cost loans in the first quarter of this year through
internal accruals.

Besides pruning its debt portfolio, the company had a number of other plans lined up for that year.
Two new cars from the Tata Motors stable -- Indigo Estate and Indica Sport -- hit the roads in the
last quarter of the year 2003. The company also launched a petrol version of its popular utility
vehicle Tata Safari.