The financial institution has suggested to the Chowgules-led management that the 9 per cent stake it holds in Narmada, which the Chowgules themselves are unable to buy back in accordance with a previous arrangement, be sold off to a party acceptable to the promoters, to whom the promoters themselves can also offload their controlling 60 per cent stake. Larsen & Toubro is learnt to be a frontrunner among those approached so far.

ICICI is therefore giving the promoters the softer option of looking for a buyer of their own choice for their stake, who will also come to eventually control the financial institution's shareholding. It will not, in other words, bring in a rival through a sellout.

The Narmada Cement stock has witnessed tremendous activity over the last few days and hit the circuit breaker on Tuesday at theBombay Stock Exchange. The stock price zoomed to Rs 23, after closing at Rs 18.75 on Monday.

The Chowgules are already in touch with possible suitors. Larsen & Toubro, the country's second largest cement maker, has initiated talks with the Chowgules, who are asking for a price of Rs 2,500 per tonne. This will translate into a price of Rs 300 crore for the 1.2-million-tonne company. The promoters, the Chowgules, have a 60 per cent stake in Narmada Cement's Rs 50.77-crore equity.

Even French giant Lafarge, which surprised corporate India by acquiring the cement division of Tata Steel for Rs 550 crore earlier this month, is believed to be studying a proposal from the Chowgules, although sources close to Lafarge denied such a possibility.

"We are looking at several options, we have to carefully weigh all routes available to us," said a guarded Ashok Chowgule, promoter and managing director of Narmada Cement.

The Chowgules, sources say, had availed of a Rs 50-crore loan from ICICI in 1995-96 to pay offhigh-cost debt, and in return the Chowgules offered ICICI an equity stake in the company at Rs 24 per share.

However, the deal which was worked out in line with BIFR recommendations in 1995-96, incorporated a buy back clause under which the Chowgules were to buy back the ICICI stake three years later at a premium of around Rs 30 per share.

Meanwhile, the Narmada Cement stock crashed in the stock markets and the Chowgules found themselves in financial stress following lacklustre performance in other group companies as well. The problems were further compounded as Scancem of Norway dropped earlier plans to pick up a 25 per cent stake, thus scuttling Narmada Cement's ambitious project to double cement capacity to 2.5 million tonnes.

Although the Narmada Cement promoters acquired the ICICI holding of 60 lakh shares as promised last year, it could not buyout the institution's stake that was held through associates ICICI Securities and ICICI Mutual Fund due to financial difficulties.

Between them the twofirms hold 9 per cent in Narmada Cement, of which I-Sec currently holds 28 lakh shares in Narmada Cement, and the ICICI Mutual holding in the cement company is 20 lakh shares.

Narmada Cement, hit hard by the continuing recession in the industry, has already shut down its grinding unit at Magdalla near Surat in Gujarat.

The grinding unit at Surat has a capacity of 6.5 lakh tonnes, and Narmada Cement is currently transporting cement from its 4-lakh-tonne Jaffrabad facility, also in Gujarat, to partly meet the demand of the region. Narmada Cement, with an annual capacity of 1.25 million tonnes, has its third plant at Ratnagiri in Maharashtra.

Narmada Cement slipped into the red with a net loss of Rs 5.84 crore in 1997-98, as against a profit of Rs 11.24 crore in the previous year. Even the operating profits were down to Rs 7.13 crore from Rs 23.56 crore in 1996-97, and analysts say that the current year may be even worse for the company as it witnessed a record fall in prices in the westernregion.