The diversified Binani group, which was all set to sign the dotted line on Sunday, withdrew at the last minute citing the deal will not be in the interest of the company. This was due to disagreement over the nature of DLF receivables outstanding, and whether these could adequately compensate Binani for an upfront repayment of certain loans owed by DLF to its promoters.

It is learnt that the DLF Cement promoters had already agreed to an arrangement whereby they would initially become minority shareholders of a merged company to be formed through amalgamation of zinc major Binani Industries' wholly owned subsidiary Binani Cement and DLF. The idea was that the DLF promoters would offload the shares to the Binanis after 18 months. But they also sought a consideration of Rs 34 crore upfront for unsecured loans that the DLF promoters had advanced totheir company.

The DLF promoters, it is understood, had suggested creation of an escrow account in which business receivables amounting to Rs 55 crore will be trapped, which will be diverted to pay off the unsecured loans. But the Binanis, it is understood, were not too comfortable with the quality of the receivables, and decided not to go ahead with the deal.

The Binani group, however, declined to comment on the matter. While DLF Cement, say sources, offers credit of up to 90 days, the Binanis, as a matter of policy, do not offer credit to customers and prefer a cash-and-carry system.

According to the proposed merger followed by acquisition, the Binanis had been planning to make an open offer for Binani Cements post merger to buy out the DLF promoters. It is understood that an offer price of Rs 8 per share was being considered, which would have followed the merger.

DLF Cement has a debt burden in excess of Rs 380 crore, and financial institutions are not yet believed to be in favour of writing offthe loans. This too may have proved to be a major stumbling block for the deal as transfer of the hefty debt would have skewed Binani Cement's debt-equity ratio to disproportionate levels.

DLF Cement has been on the lookout for a buyer for quite sometime. Talks with Gujarat Ambuja fell through some time ago due to reported differences on the price front, where the huge debt burden proved to be the contentious issue. DLF had asked for a price of around Rs 185 crore and sought a simultaneous debt transfer which proved unacceptable to Gujarat Ambuja.

DLF Cement, whose plant is located at Pali in Rajasthan, recorded a net loss of Rs 52 crore in 1997-98, and has been facing a serious cash flow problem. Although ICICI and IDBI reportedly agreed to reschedule loans worth around Rs 90 crore by extending the repayment period to 2002, Washington-based International Finance Corporation refused to reschedule its aggregate dues of around Rs 100 crore.