The board decision to declare NEL sick came after the company's net worth (share capital plus reserves) of Rs 71.60 crore was wiped out on account of its accumulated losses to the tune of Rs 79.10 crore.

BIFR has asked the promoters of NEL to submit a rehabilitation proposal with means of finance fully tied up. It has also directed the promoters of the company not to dispose of any of fixed or current assets without its consent, the board order said.

It has also asked IDBI to independently examine the techno-economic viability of the company and examine vrious proposals for reviving the company.

NEL is engaged in manufacturing and export of textiles, shoes, readymade and leather garments. Problems for the company started in 1993-94 when it ventured into shoes andgarments, a non-core area and also raised funds through a public issue for the same.

Simultaneously, there was recession in the european market which adversly affected the export of its leather garments.

As a result of the initial crisis, the company raised a large amount of long terms debt in 1995-96 which was used to fund working capital margins as well as losses.

This borrowing increased the financial burden of NEL and pushed it into further losses.

As part of the rehabiliation scheme, BIFR has asked IDBI to get the valuation of NEL assets along with suggesting various measures to suggest cost reduction mesures for revving the company.

BIFR has also suggested that reliefs and concession of loans should be worked out in tune with Reserve Bank of India (RBI) norms and the extent of interest free funds required to meet the shortfall despite these reliefs should also be quantified.

Market potential for the company's existing and proposed product should be studied in-depth by IDBI, BIFR statedadding that the operating agency should also examine NEL's capability to convert potential demand into effective demand.

It has also suggested that IDBI should also consider various measures for strengthening and streamlining the management set-up through appointment of concurrent auditors and appoitment on nominee directors.

NEL which had a fixed assets of Rs 32.02 crore up to March 1998 has outstanding loans of Rs 29.42 crore with State Bank of India.

In order to repay a part of the loan to SBI, BIFR has directed NEL to deposit Rs 1.25 crore, the entire proceeds of the readymade garment unit, with the bank.