The payment to UTI, which accounts for Rs 45 crore out of the Rs 77-crore aggregate dues, will be made as soon as Sebi's clearance for a forthcoming rights issue is obtained. Approval for the rights issue will enable India Cements to raise a bridge loan against the proceeds of the proposed issue of Rs 160 crore.

Quashing rumours that India Cements may be hard put to pay up, senior company sources said the question of having defaulted does not arise since the date beyond which such dues will start attracting interest is September 30, still more than a week away. The agreement with the financial institutions (FIs) builds in provisions beyond that date which include an interest charge, so defaultcannot technically take place, claimed sources.

The sources said that while the large payment to UTI will depend on the Sebi approval, smaller dues of three institutions will be cleared before the September 30 deadline, which will reduce the company's interest burden.

According to the memorandum of understanding agreed upon with the FIs -- UTI, Life Insurance Corporation of India, Industrial Development Bank of India and Industrial Finance Corporation of India and General Insurance Corporation -- India Cements is entitled to pay for Raasi shares within September 30 free of interest. Payments made beyond that date, according to the agreement, will attract an interest liability of 17 per cent to 18 per cent.

Of the total liability to the financial institutions amounting to Rs 77 crore, the largest chunk is due to UTI at Rs 45 crore for the sale of 15.3 lakh shares of Raasi Cement at a whopping price of Rs 300 per share. LIC has been the second largest block seller of Raasi Cement shares having sold 5.42lakh shares to India Cements, while IDBI and IFCI sold 1.69 lakh shares and 2.23 lakh shares, respectively. Besides, India Cements also bought 0.8 lakh shares from United India Assurance, General Insurance Corporation, New India Insurance and Oriental Insurance.

Company sources say that although the initial plan was to clear off the institutional dues by taking bridge finance, the whole exercise got delayed due to the depressed market conditions. For India Cements, bridge loans could be availed only if it received Sebi clearance for its proposed rights issue. "Now that the terms of the rights issue have been revised, the market watchdog decided to treat it as a fresh offer, which in turn delayed availability of bridge loans," said a company official.

As reported earlier, India Cements has filed a revised prospectus with Sebi for its rights issue, which proposes to halve the premium to Rs 25 per share. Even the rights ratio was altered to a favourable 1:1 from 1:2 proposed earlier, thus maintaining themop-up amount at Rs 160 crore.

The company, officials said, is currently negotiating with nationalised banks for the bridge loan facility, which is likely to be pegged around the prime lending rate. India Cements is hopeful that its proposed rights issue will hit the market in November.