The restructuring package was finalised by the IDBI in August 1998 which included a reschedulement of loans and reduction in interest rates by around 4.5 per cent in what could be considered an effort to bail out the company. As per the plan, the loan-repayment period was to be extended from 1999-2000 to 2004-05 and the overdrawal on the working capital was to be converted into term loans.

``The promoters appear to be elusive about the initial contribution. IDBI has sent many reminders about the need to kickstart the restructuring process because the extended repayment period is proposed to start from October 1999,'' said IDBI sources.

Sources also said that if the promoters are not willing to implement therestructuring package, the institutions have to resort to the drastic step of recalling the loans. However, they added, such a step will be taken only after every other alternative dries out.

While extending the loan repayment period, financial institutions have made a pre-condition of Rs 15 crore as initial contribution to take care of the interest. As per the plan, the promoters were to bring in Rs 10 crore by December 1998 and the balance 5 crore by March 1999.

The company is among many polyester companies whose fortunes have been affected due to sluggish market conditions. The bad phase for Sanghi Polyester started in 1995-96 when a cyclical recession in the polyester market took a heavy toll on companies. It reported a huge loss of Rs 30 crore in 1997-78. The company's polyester filament yarn plant is located in Hyderabad.

The financial institutions have, of late, been resheduling the loans of many polyester companies. The recent example is the Rajus-controlled DCL Polyester which has been given anextension in the loan-repayment period.

What has really been upsetting the calculations of the polyester companies is rampant underinvoicing of imports by traders and the expected anti-dumping measures against imports of purified terepthalic acid (the raw material for polyester). Traders have begun bringing in cheap imports exploiting advantages arising from the southeast Asian meltdown, industry sources said.

The high excise duty of around 34.5 per cent duty has been the major reason for the closure of many polyester units. There are around 36 polyester manufactures in the country of which seven have shut shop with many more to follow suit.