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Mr P.K. Ruia

Pratim Ranjan Bose

Kolkata, Oct. 28 A timely restructuring of $125-million foreign currency loan (over Rs 600 crore at current exchange rate) may help Mr P.K. Ruia-led Ruia Group from the impact of falling rupee.

Group outfits such as Falcon, Monotona (both makers of two- and three-wheeler tyres) and Jessop are expected to survive the slowdown in the economy riding on OE demand from two-wheeler makers and railways respectively.

The economic crisis, however, leaves little hope for scaling up operations of Dunlop India. Out of two factories of Dunlop, only one is running at almost half of the projected 90-tonne capacity.

Responding to queries on loan exposure of the group, Mr Ruia said that while companies such as Jessop and Dunlop have only working capital finance, Falcon has Rs 90-crore term loan exposure to finance captive-cogeneration and capacity expansion projects.

The only major loan exposure that the group has is through its Singapore-based SPV Wealth Sea Pte Ltd for acquisition of Mauritius-based DIL Rim and Wheels, which in turn controls Dunlop and Falcon.

Initially Wealth Sea financed the acquisition through borrowing from Deutsche Bank and few overseas hedge funds.

After a series of restructuring, Wealth Sea recently consolidated its total borrowings of $125 million to an undisclosed Indian bank. The loan agreement was finalised a fortnight ago.

According to Mr Ruia, the five-year term loan will be paid back in three annual instalments beginning third year and interest payment will begin in March 2010.

Meanwhile, Falcon has reported a drop of nearly 80 per cent in net profit to approximately Rs 3 lakh in the second quarter compared to the corresponding period last year. This was irrespective of the five-per-cent rise in turnover.

“There is no denying that the pressure on margins will only increase in the days head. However, OE demand projection continued to be strong in October-November,” he said.

More Stories on : Outlook | Tyres | Overseas Borrowings

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