Sical Logistics Limited has informed the exchange about giving of corporate guarantee for its step down material subsidiary company i.e., Sical Multimodal and Rail Transport Limited.
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Sical Logistics Limited's board has approved giving an unconditional and irrevocable corporate guarantee of Rs. 20 crore for its step-down material subsidiary, Sical Multimodal and Rail Transport Limited (SMART). The guarantee covers credit facilities of up to Rs. 20 crore being availed by SMART from CSB Bank Limited, which includes a cash credit facility of Rs. 10 crore (repayable on demand) and a term loan of Rs. 10 crore with an 8-year tenure. The funds are meant to meet SMART's working capital and capital expenditure needs. The guarantee will be issued only after shareholder approval, and promoters have no interest in the transaction. The company stated that this will not materially affect it as SMART is expected to generate sufficient cash to service the obligations, though it will appear as a contingent liability in the books.
Shareholders should note that Sical Logistics is exposing itself to a contingent liability of up to Rs. 20 crore on behalf of its subsidiary. While management expects no material impact, any underperformance by SMART could translate into actual cash outflows for the parent company. Shareholder approval will be sought, giving investors a chance to weigh in.