Shares of Cox & Kings, among the world’s oldest travel firms with a continuous operating history of more than 250 years, have lost 90 per cent this year after the company took on debt that could not be serviced on time due to cash-flow mismatches. Says the article published in Economics Times.
But analysts are pointing to a bloated balance sheet for the precipitate stock decline even as investors sought to involve regulators to probe, what they alleged, was fraud and mismanagement.
Promoter Peter Kerkar’s goal of making aspirational travel affordable through NBFC Cox & Kings Financial Services has also remained elusive, with the stock falling 97 per cent from Rs. 72 on January 1 to Rs. 2.49 last Friday.
Rating agency CARE raised the red flag by the end of June over the company’s failure to explain the reason for default despite sufficient liquidity. Cox & Kings told ET that it has since repaid certain credit facilities and its working capital position was stretched in the first quarter of FY20, resulting in a cash-flow mismatch due to which the company could not repay commercial papers due end-June.
Investors and analysts said it is difficult to believe the company’s version of cash-flow mismatch. Some investors in a letter to the Special Fraud Investigation Office (SFIO) and market regulator Sebi last week alleged that the promoter diverted funds from the company’s books, with no details on the end use of the proceeds of Rs. 4,387 crore from last year’s sale of the education business to Midlothian Capital Partners. It is alleged that the money never reached the balance sheet of Cox & Kings.
“Despite inflows exceeding Rs. 2,000 crore from the two transactions, the company diverted from its guidance of using entire sales proceeds toward debt repayment and reduced debt only by Rs. 1,350 crore until April 2019,” said Rashesh Shah, analyst, ICICI Securities.
Another point is that 70 per cent of promoter holding was pledged as of June 30, 2019. Promoter entity Sneh Sadan Traders and Agents has availed debt of Rs. 944 crore against its paid-up capital of Rs. 9 lakh and is learnt to have pledged Cox & Kings shares as collateral for this loan. Analysts have blamed the plunge in stock prices to non-repayment of debt taken by promoter entities.
Regarding a loan of Rs. 1,339 crore availed from Yes BankNSE 3.94 % in August 2018, the company said that Prometheon Enterprise, a UK-based 100 per cent subsidiary of the company, availed a credit facility in 2012.
This credit facility had been refinanced in March 2018, and the Yes Bank loan availed in August 2018 is not a new loan. However, Cox & Kings agreed that it has borrowed Rs. 211 crore from Axis BankNSE 0.86 % in September 2018 and ₹175 crore from Bank of BarodaNSE 2.60 % in December 2018.
Source: As per the news By Rajesh Mascarenhas published in Economics Times on
July 23, 2019.
