P Radhakrishnan, whole-time director and chief financial officer, Kesoram, said this was an enabling resolution and the funds would be used predominantly to replace debt.
As on March 31, 2020, Kesoram's net current liabilities were Rs 1,156.20 crore at a standalone level and Rs 1,250.50 crore at a consolidated level, respectively.
Further, the company has not complied with certain financial debt covenants and has defaulted in repayment of letters of credit, its working capital facilities and interest payable to lenders aggregating to Rs 272.77 crore in respect of term loans and working capital facilities as on March 31, 2020, the notes to accounts said.
The default is primarily caused due to liqudity mismatch, while the company has continued to genetrate positive cash flow from its business operations, it read.
Kesoram is also working towards a resolution plan with the lenders and has signed a non-binding term sheet with a potential investor, which will enable it to scale up its operations and meet the remaining financial obligations.
Radhakrishnan said that the investor was a financial investor. "The idea is to focus on operations and solve liquidity issues," he said.
The company posted a pre-tax loss of Rs 15.95 crore in the June quarter at a consolidated level compared to a pre-tax profit of Rs 46.67 crore. Revenue from operations were at Rs 427.29 crore compared to Rs 800.84 crore in the same period last year.
Operations were impacted due to shutdown of all plants and offices following the nationwide lockdown and were resumed in a phased manner.
On a standalone basis, Kesoram however, recorded a pre-tax profit of 18.10 as against Rs 64.64 in the same period last year while revenues were at Rs 409.03 crore compared to Rs 718.10 crore.