Issuance of corporate guarantee in connection with the term loan availed by the WOS.
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Constronics Infra Ltd has issued a corporate guarantee of Rs. 19 crores to the lender of its wholly-owned subsidiary, Constronics Energy Solutions Private Limited, as security for a term loan facility availed by the subsidiary. The transaction is described as being conducted at arm's length, and the promoter group is deemed interested since the borrower is the company's WOS. The company states there is no immediate financial impact, but it has created a contingent liability to the extent of the guaranteed amount.
The move supports the subsidiary's growth funding but exposes the parent company to a contingent liability of Rs. 19 crores if the subsidiary defaults. Shareholders should monitor the subsidiary's ability to service the loan, as any default would directly hit the listed entity's balance sheet.