Lakhani turns non-performing assets (NPAs) for AllBank
Not just the flagship, almost all group entities of the Faridabad-based P D Lakhani such as Lakhani Apparel, Lakhani Packaging, Lakhani Rubber Udyog and Vardaan Developers, have turned into non-performing assets (NPAs) for the bank.
“We’ve disposed of about Rs112 crore worth of dud loans to the group companies,” said an official of the Kolkata-based bank.
Before turning an NPA, Lakhani used to produce 1.75 lakh pairs of footwear per day at its peak and distribute them through a network of 12,000 dealers.
It had deals with Reebok for outsourced manufacturing and, through its auto components division, with automobile-makers such as Maruti Suzuki, Tata Motors and Escorts for supply of rubber-based products.
But the slide began in 2010-11. By 2012-end, Lakhani India had incurred a loss of Rs25 crore, acontrast to a profit of close to Rs4 crore the previous year.
Subsequent financial figures are not available. Banking sources said cash-flow problems, management issues and family feud involving K C Lakhani and P D Lakhani, the two
brothers who controlled the empire, triggered the downfall.
After building the group since the 1970s, the two brothers fell apart and started the process of dividing the businesses between themselves, which led to a long-drawn legal battle at the Company Law Board.
A formal split of the business house took place in 2008 with the brothers getting to keep the right to to use the Lakhani brand.
P D Lakhani carved out companies such as Lakhani India and Lakhani Rubber Udyog, while K C Lakhani bagged Lakhani Footwear and Lakhani Rubber Works.
P D Lakhani’s group entities, including the listed Lakhani India, have turned into bad assets for the bank alright, but the going has been no less a struggle for K C Lakhani’s firms.
Ratings agency Crisil downgraded the K C Lakhani Group to high risk of default last October.
“The downgrade reflects pressure on the Lakhani group’s liquidity, marked by its continuous high utilisation of its bank limits, resulting from its large working capital requirements,” Crisil had said then.