Dhampur Sugar Mills in India has mandated Ernst & Young to chalk out an asset sale strategy as a part of the company’s ongoing debt restructuring exercise.
Under the terms of the mandate, Ernst & Young will initially identify the unit to be sold, conduct a valuation, and later scout for a buyer.
“The investment banking mandate to Ernst & Young was recently given by the company. Earlier, ICICI Bank had held consultations with a number of investment bankers during which Ernst & Young had indicated the desire to be appointed as investment bankers,” senior institutional sources said.
Gaurav Goel, director on the board of Dhampur Sugar Mills, declined to comment on the issue. Dhampur is primarily a manufacturer of sugar but chemicals also contribute a smaller percentage to its turnover.
The company has three sugar manufacturing units. The debt restructuring exercise of the company comes even as the company shows signs of turning around.
Dhampur posted a net profit of Rs 2.07 crore for the quarter ended June 30, 2003 against a loss of Rs 5.43 crore in the corresponding period of the previous year.
The company’s losses for the nine month period ended June 30, 2003 stood at Rs 2.84 crore against Rs 2.25 crore in the corresponding period of the previous year.
The corporate debt restructuring (CDR) cell comprising of senior representatives of banks and financial institutions is at present working out a strategy for restructuring loans by the company.
Although, the details in the case of Dhampur could not be ascertained, the CDR strategy typically entails infusion of additional funds by promoters and selling an asset to release funds by the company.
In return, the lenders reduce the interest dates on existing debt and increase the maturity period of the loan. In some cases, they also take a hair cut.