Kamalnayan Hotels is at 4.6x net debt to EBITDA against a 4.0x covenant. Size an equity cure, a hotel sale and a waiver, and say which you would use.

A cure needs Rs 150 crore of equity, the hotel sale takes leverage to about 3.6x, and a waiver costs Rs 5.75 crore but fixes nothing. The cure lands exactly on 4.0x with no headroom. The sale cuts Rs 360 crore of debt for Rs 30 crore of EBITDA, leaving room for EBITDA to fall about 10%. Take the waiver as a bridge, sell the hotel to fix the ratio, and keep the cure as the fallback.

A ratio, and a ratio has three ways to move. Leverage is net debt over EBITDA, so you can shrink the top, grow the bottom, or ask the person who set the limit to look away. A household whose EMIs have grown past the share of salary a bank allows has the same three choices: prepay with savings, earn more, or ask the bank for a holiday. Write the ratio first: Rs 1,150 crore over Rs 250 crore is 4.6x, and 4.0x times Rs 250 crore means debt must come down to Rs 1,000 crore.

The equity cure is the gap between actual and permitted debt: Rs 1,150 crore less Rs 1,000 crore, so Rs 150 crore. Some loan agreements instead let the cure count as deemed EBITDA, which is far cheaper: EBITDA would need to reach 1,150 over 4.0, Rs 287.5 crore, so a cure of only Rs 37.5 crore. Ask which version the equity cureA clause letting shareholders put in fresh money to fix a failed financial covenant, counted either as debt repaid or as extra EBITDA. clause uses before sizing anything. The hotel sale raises 12 times Rs 30 crore, Rs 360 crore. Net debt falls to Rs 790 crore, EBITDA to Rs 220 crore, and leverage to 3.59x. The waiver costs 0.5% of Rs 1,150 crore, Rs 5.75 crore, and leaves the ratio at 4.6x.

Because a covenant is tested every quarter and the business that breached it has not changed. A cure that lands exactly on 4.0x leaves no room for a bad month, so the next test can fail again. To match the sale's headroom, the cure would need to take leverage to 3.59x, which means about Rs 252 crore of equity. The waiver is cheap in cash, but lenders usually pair it with a higher margin and tighter terms, and it only moves the problem forward a quarter.

Sequence them. A hotel sale will not close in ten weeks, so take the waiver now as a bridge, use the time to sell the hotel at 12x, and keep the equity cure as the fallback if the sale slips. The sale is the only option that improves the balance sheet rather than paper over it, and it is value-friendly if the group trades below 12x EBITDA: shareholders swap Rs 30 crore of EBITDA for more debt reduction than the market would credit it with. The cost is a smaller business and Rs 30 crore less EBITDA to grow from, which is worth saying.

State the limit. Taxes on the sale gain, transaction costs and any hotel-level debt that must be repaid first would all reduce the Rs 360 crore, and the lender may insist that sale proceeds repay its loan rather than sit as cash. Check all three before promising the board a number.