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Alok Industries faces insolvency action

Lenders to Alok Industries will start corporate insolvency proceedings against the textile firm. The textile company reported a consolidated loss of Rs 3,071 crores on an income of Rs 8,919 crores in 2016-17. It had booked a loss of Rs 4,367 crores on revenue of Rs 12,929 crores in 2015-16.

The company created large capacities through debt funding to cater to global demand, but with the slowdown in international markets, it was hit badly. This capacity creation was accompanied by a large accumulation of debt. Now, it faces a mismatch in timing of cash inflows and outflows, creating severe financial stress.

The company, in its 2015-16 annual report, listed factors such as demand slump, investment calls going wrong and fluctuations in foreign exchange as key reasons for its poor performance.

Its investments in retail, both in India and the UK, did not pan out as expected. While it closed operations in India, the UK business is still burning cash. The diversification into real estate, although intrinsically value creating, failed to give any asset appreciation and essentially locked up large capital.

Alok is a fully integrated textile company with a dominant presence in the cotton and polyester segments. The company is engaged in manufacturing of textile, including mending and packing activities, leather and other apparel products.

 
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