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Nandini Goswami
Calcutta, Dec 28: Williamson Magor group company Kilburn Chemicals has sought shareholder approval for a 50 per cent cut in its equity capital as part of its financial institutions-approved rehabilitation package.
Since its net worth eroded by more than 50 per cent, the company submitted a rehabilitation package to term-lending institutions seeking fiscal reliefs and concessions from its lenders and shareholders to improve its liability position.
The special resolution, which will be tabled at the company's annual general meeting on Tuesday, includes a proposal to cut the paid-up equity share capital from Rs 14.85 crore to Rs 7.42 crore.
The paid-up share capital will be divided into 14,85,000 equity shares of Rs 5 each, and will be effected by cancelling the share capital to the extent of Rs 5 per share, which effectively means reducing the nominal amount from Rs 10 to Rs 5 per equity share.
The institutions which have approved the rehabilitation package have also allowed a few benefits -- waiver ofcompound interest and liquidated damages, reduction in the interest rate on term and unsecured loans, and reschedulement of repayment obligations. Magor sources feel these measures could help the company improve its operating results.
Apart from halving the share capital as on March 31, 1998, the package proposes issuing cumulative redeemable preference shares in place of 50 per cent of unsecured loans brought in by the promoters of group companies, for which the company needs shareholder approval.
To give the proposal effect, the company has to allot cumulative redeemable preference shares to lenders of unsecured loans. Hence, the company needs to increase its authorised share capital by creating 4,00,000 cumulative redeemable preference shares of Rs 100 each.
Kilburn Chemicals has sought shareholder approval for increasing its authorised share capital from Rs 16 crore--divided into 1,60,00,000 equity shares of Rs 10 each--to Rs 20 crore by creating 4,00,000 cumulative redeemable preference shares ofRs 100 each.
To enable this resolution, the board has been empowered to issue and allot preference shares on a private-placement basis to investors.
The board has decided that in case of fractional entitlements resulting from the reduction exercise, they will be consolidated into whole equity shares by rounding off the fractions, wherever required, and vested in a trust consisting of directors. The trust will, in such cases, be authorised to sell and distribute the respective fractional entitlements.
The company, which makes chemicals like titanium dioxide, ferrous sulphate and mixed sulphate salt as its main products, improved its capacity utilisation to 72 per cent during 1998-99, from 55 per cent the previous year. This was said to have been achieved in the midst of uninterrupted water supply from the State Industries Promotion Corporation of Tamil Nadu Ltd (Sipcot). Besides, the company took certain conservation and recycling measures for combating this problem.
The company had to bear with asluggish trend in titanium dioxide prices during the whole of 1997-98 despite higher production. The stagnancy in price levels may be attributed to dumping by various foreign countries and the misuse of the value-based advanced licensing scheme.
From June 1998 onwards, however, the selling-price realistion has witnessed an improvement. The levy of 4 per cent additional customs duty and the depreciation of the rupee have arrested the free flow of imports, leading to better sales realisation.
The company recorded a sales turnover of Rs 21 crore in 1998-99, a growth of 32 per cent over the previous year's turnover of Rs 16.5 crore. It posted a loss of Rs 3.3 crore in the last fiscal, against Rs 4.4 crore the previous year.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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