New Delhi, Dec 23 (PTI) Fabrics and garments manufacturer Bombay Rayon Fashions Ltd (BRFL) has said it would hive off its Tarapur yarn dyeing and fabric processing unit to its subsidiary company BRFL Textiles Private ltd, under slump sale as part of its restructuring efforts.

The board of the cash-strapped company had on Sept 2 approved the slump sale for an overall proposed consideration of Rs 630 crore to be paid by its subsidiary, BRFL said in a statement.

According to the plan, the said transaction was to be competed within 90 days as per the board and shareholder approval.

"The company is making an honest effort to derive maximum stakeholder value and get rid of the NPA (non-performing assets) status," said BRFL Managing Director Prashant Agarwal.

In the past, BRFL has been a partner to global brands, such as GAP, Abercrombie & Fitch, American Eagle and Ann Taylor, and look forward to re-establish these relationships, he added.

"Post-transfer of assets, excluding the minimum debt obligation, the infused equity in the subsidiary will be used for funding the working capital and ramping up the Tarapur assets," he said. It will cater to high-margin branded businesses and has the potential to generate revenues in excess of Rs 2,000 crore annually given the paradigm shift in geopolitical and manufacturing preferences, he added.

Tarapur unit generated an income of Rs 372.77 crore as on March 31, 2020.

"As per market sources, it has been understood that the new investors will cumulatively hold around 25 per cent equity stake in the subsidiary entity," it said.

Currently, the manufacturing and processing capacity of the Tarapur unit stands at 5 lakh metres of fabric a day and its current utilisation stands at only 15 per cent due to the lack of working capital. 

BRFL, whose operations have effected due to liquidity crunch due of the untoward capacity expansion and non-optimal utilisation of the manufacturing facilities, is working towards reducing its debt obligations. 

The company has been restructured twice under the RBI Restructuring Schemes. The management's decision to transfer its Tarapur asset to the subsidiary has been done to retain its going-concern value.

He added that other non-monetary benefits to this transaction are continued employment of 20,000 people, statutory and government dues payoffs. "BRFL's financial debt payments behest the cash revenues that will be generated by the subsidiary from domestic and foreign exchange earnings."

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