As per sources, it has been reported that the Daawat brand basmati rice producer and exporter M/S LT Foods has planned to challenge the rejection of insurance claims made by it for the damage to paddy and rice inventory in a fire at its Raisen unit in Madhya Pradesh during June 2014. It has been revealed that the fire damaged paddy worth Rs 189 crore and the stock was fully insured with Oriental Insurance Company (OIC). However, when LT Foods claimed the payment, OIC rejected it. The claim amount was six times its net profit of Rs 30.65 crore in 2014-15 and 63 per cent of its standalone net worth of Rs 302 crore as on end-March 2015.
According to Mr Vijay Kumar Arora, chairman of LT Foods, revealed that Oriental Insurance Company did not give any reasons and however, we had made a genuine claim, after taking advice from top lawyers, including P Chidambaram, former finance and home minister of India, and Abhishek Manu Singhvi, Congress party spokesperson. Further, in this regard, it was informed that our company will file suits against OIC. Moreover, the efforts to reach Mr A K Saxena, chairman and managing director of OIC, did not elicit a response too.
In view of a result of stressed assets, credit rating agency ICRA has kept LT ‘under watch’ since LT company had already availed bank funding of Rs 135 crore. Due to repudiation of the current claim, the repayment/funding gap will need group refinancing and which is likely to impact the liquidity position in short to medium term, and keep debt levels elevated. Further, the LT Foods recently has also acquired the branded rice business of Hindustan UniLever. The company, with its Daawat and Heirtage brands, has a significant presence in both the domestic and international markets. It has also the manufacturing facilities in Haryana and Punjab, with 84 tonnes per hour of milling capacity, while exports contribute nearly half the annual.