Walchandnagar Ind looks to replace high-cost KKR debt

Walchandnagar Industries Ltd (WIL), engaged in engineering, procurement and construction (EPC) business, has initiated talks with banks and finance companies to replace high-cost debt raised from private equity player KKR, said two persons with knowledge of the matter.
Between July and October this year, a KKR managed fund and its finance company acquired 24.9% equity stake of Walchandnagar Industries by invoking shares pledged by promoter and promoter group companies after the oldest business house missed payments on debt facilities totalling to Rs 25.9 crore, according to the disclosures made by the company to the stock exchange.

The default to KKR was on account of a delay in receiving payments of USD 4.2mn from Tendaho Phase I Project in Ethiopia, one of the persons cited above said.

The private equity player has refrained from invoking 25% or more stake as it would trigger an open offer as per the guidelines by the market regulator, a third person said.

Between mid-October and mid-November, KKR has sold 3.77% stake it held in WIL in the open market, according to a stock exchange notice.


“The constraint in extending debt facilities to such companies that have the government as a client is a risk of not receiving timely payments despite timely execution of the project. It’s a B2G (business with government) risk which is difficult to mitigate,” said one of the private credit providers who was approached by the company for refinancing of the debt facilities. “As a result of non-payment, it is difficult to scale up the business,” he added.

The company had plans to exit the EPC business by completing projects in hand, the person said.

KKR declined to comment for this story. WIL did not respond to the request for comment.

In 2017, the company had taken a secured loan of Rs 180 crore and issued debentures of Rs 57 crore to KKR at 14% per annum.

The company had outstanding dues of Rs 183.38 crore from the KKR managed fund and its NBFC, which are payable by 31 March 2024 in several instalments. It has Rs 212 crore working capital loans and Rs 9.6 crore letter of credit as of March 31, 2021, according to the disclosure made in the balance sheet.

The promoter and promoter group companies held a 55% stake in the company as of September 30, 2021, and nearly all their holding - 53.99%- is pledged with KKR India Opportunity Fund and KKR India Financial Services Pvt Ltd.

The lockdown due to the pandemic adversely affected the supply chain, production and logistics business and thus the company failed to achieve turnover while also reporting losses. The company availed Rs 22 crore emergency credit line from State Bank of India and Bank of India to continue its operations. Chakor Doshi and his family promoted WIL has three manufacturing plants located in Pune, Satara and Dharwad.