NRB Industrial Bearings Limited has informed the Exchange about Issuance of Corporate Guarantee to NRB-IBC Bearings Private Limited and NIBL-Korta Engineering Private Limited, associate companies of NRB Industrial Bearings Limited pursuant to Section 188 of the Companies Act, 2013
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NRB Industrial Bearings Limited has approved issuance of corporate guarantees totaling Rs. 13 Crores for two associate companies. NIBL-KORTA Engineering Private Limited received a Rs. 5 Crores credit facility, and NRB-IBC Bearings Private Limited received an Rs. 8 Crores credit facility. The company is providing these guarantees to the lenders of the associate companies. This is a related party transaction as certain promoters and directors have common shareholding or directorship in the associates. The company states the guarantees were issued on an arm's length basis and claims there is no impact on the company at this stage.
This creates contingent liability exposure of Rs. 13 Crores for NRB Industrial Bearings. If either associate defaults on their credit facilities, the company would be obligated to fulfill the guarantee, which could strain its finances. The related party nature also raises questions about arm's length pricing.