Lenders to take over Diamond Power, look for investor

Diamond Power Infrastructure Ltd said on Friday its board has approved a debt recast plan that will give its creditors a stake of at least 51% in the company.

The lenders will then seek to sell at least a 26% stake to an investor, Diamond Power said in a stock-exchange filing. The selected investor will have to make an open offer to buy 25% more of the electrical equipment maker from public shareholders, it added.

The board approval comes after the lenders last month cleared the Strategic Debt Restructuring (SDR) process. SDR is a mechanism that allows creditors to convert their debt into equity and take over management if a company defaults.

The company had said in May that it had received an offer from China’s Jiangsu Longzhe Trade & Technology Company to invest $125 million (about Rs 825 crore).

On Friday, the company said its lenders have appointed auditing and consulting firm EY, formerly Ernst & Young, to carry out a transparent and open process for finding an investor. The lenders will consider Jiangsu’s proposal as the base offer and may also consider better offers, if any, the company said.

The entire process is likely to be completed within 100 days, Diamond Power said.

The company on Friday reported a wider consolidated net loss of Rs 332.6 crore for the financial year through March 2016 compared with Rs 183.3 crore the year before. Consolidated net sales fell almost 22% to Rs 2,222 crore. It had long-term debt of Rs 1,230 crore and short-term borrowings of Rs 1,019 crore as on 31 March 2016.

Shares of Diamond Power fell 2.3% to Rs 39.80 apiece on Friday, giving it a market value of Rs 226 crore.

In March, Kotak Private Equity part-exited Diamond Power at a loss by selling more than a third of its stake through open market transactions.

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