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Last Updated:[28-07-2012 07:02:12 EDT] Zoom in Zoom out Back to Tradenews

Textile companies seek Rs 12000 crore debt recas

tradenews KOLKATA: The textile industry will put forward 290 cases involving Rs 12,000 crore of debt restructuring to the department of financial services this week. These 290 cases involve spinning, weaving and processing units across India. RBI has asked banks to look into textile debt restructuring on a case-to-case basis. The debt restructuring process will kick off from the first week of August. The textile industry is hopeful that a two-year moratorium on the repayment of principal amount against term loan will provide enough liquidity and help them meet export orders at a time when the US market is showing slow signs of recovery. DK Nair, secretary general, Confederation of Indian Textile Industry, told ET: "We have received some 290 cases from different sectors of the industry. Apart from the moratorium on interest payment, the eroded working capital of these units will be converted to working capital term loan for a period of three to five years. We will forward the cases to the finance ministry this week. This is the right time to restructure the debt as the US market is showing some signs of recovery. Mills will have the much-needed cash for buying raw materials." There are 5,000 textile units in spinning, weaving and processing sectors employing nearly 35 million people. The spinning mills are largely concentrated in Tamil Nadu, Andhra Pradesh, Punjab, Rajasthan and Madhya Pradesh. The weaving units in Maharashtra, Tamil Nadu and Madhya Pradesh. The finance ministry has asked banks to consider stressed loan accounts in the textile sector for restructuring, including second restructuring, so that viable loan accounts are revived and the financial health of the units are restored, industry sources said. The sector has been hit by the sharp volatility in cotton yarn prices and poor domestic and global demand. As a result, textile units are facing difficulty in repaying term loans and financing working capital. In order to deal with the 2008 global meltdown , RBI brought in a special dispensation providing for a second restructuring for the sector. The apparel industry will also benefit from this debt restructuring exercise though indirectly. There are 30,000 apparel manufacturing units in the country in small, medium and large sectors. Gautam Nair, executive committee member of Apparel Export Promotion Council (AEPC) said: "China's labour cost is increasing and therefore buyers of Chinese textile garments are not finding it competitive to source from the country. With a little push from the government, India can become one of the biggest destinations for buyers. India is likely to sign an FTA with Europe in October which will open a new avenue for exports. If debt restructuring takes place, the textile industry will be in a much comfortable position to service overseas orders." Source: http://articles.economictimes.indiatimes.com/2012-07-24/news/32828225_1_textile-companies-textile-debt-textile-industry rel=”nofollow”

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