Company sources said the Usha Ispat board planned to intimate the IDBI of its willingness to comply with the conditions demanded by thefinancial institution for lending afresh to steel-makers. Usha Ispat will have to plough in a promoter's contribution of Rs 129 crore, to be eligible for the Rs 316 crore of additional assistance granted by IDBI.

The IDBI is insisting that promoters bring in a third of their contribution to the escalated project cost upfront. Usha Ispat's share of the upfront amount will be Rs 40 crore.

The company is setting up a six lakh tonne per annum-capacity long products plant and a two lakh tonne per annum-capacity pig iron plant at Redi in Maharashtra. The Rs 1990 crore project was scheduled for completion in April this year, but should beready by September next year, should funds be available.

The pig iron and long products plant was initially estimated to cost Rs 1425 crore, but suffered a cost overrun of Rs 565 crore. Usha Ispat needs Rs 624 crore of additional assistance and has been granted Rs 316 crore by the IDBI. The fresh funds include a new loan and the capitalisation of the company's interest on its existing borrowings from the IDBI of Rs 368 crore.

The IDBI has also demanded restructuring of the company boards, ploughing back funds diverted from steel projects to other ventures, setting up of concurrent auditors and Retention Fund Accounts. Most of the conditions will have a long term impact on steel companies, like the IDBI threat to convert its loan into an equity, should the borrower default in payment, for instance.

Steel companies are immediately concerned about bringing in a third of their contribution to the project cost overrun and ploughing back diverted funds. Ushat Ispat did not divert loans granted to its Redisteel plant to other businesses, so it only has to raise the upfront amount of Rs 40 crore to be eligible for the IDBI loan.

Company sources said it was too early to divulge the details of the ``formula'' that will have to be evolved for raising the upfront amount, but admitted that a sale of some assets by the promoters could not be ruled out. Group Usha, incidentally, also has interests in power generation, telecommunications and software.

The IDBI board, which approved Rs 1080 crore of fresh loans for six steel ventures last week, had recommended that promoters hive off some businesses, unrelated to steel-making, to be able to bring in at least 20 per cent of their escalated project costs.

Industry sources said steel companies granted funds had the option of either borrowing from Peter to pay off Paul, dipping into their internal resources, or selling off some assets. Most companies agree that the primary capital market was closed as an option for raising funds.

The dwindling bottomlines of steelcompanies did not leave them with a ghost of a chance of raising money from a sale of equity shares. The three-year-long recession in the industry had also put a pressure on the cash flows and reserves of steel producers.

Usha Ispat's net profit, for instance, dipped to Rs 0.38 crore in 1997-98 from Rs 40.07 crore the year before. The ``profits available for appropriation'' to the company were Rs 66.63 crore on March 31 1998, compared to Rs 53.58 crore the previous year.

Usha Ispat skipped a dividend for the year, after paying out Rs 11.49 crore to shareholders in 1996-97. Under the circumstances, dipping into its internal accruals to pay the upfront amount would be difficult for company. The two viable options before it, therefore, are to raise a debt from a cheaper source or to dispose of some dispensable asset.

The other companies granted fresh assistance by the IDBI are Ispat Industries, Ispat Metallics, Essar Steel, Jindal Vijayanagara Steels Limited and SJK Steel Corporation. The financialinstitution is yet to formally convey the rather stiff terms it plans to impose on its borrowers. The detailed communication from the industrial lender is expected next week.