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PRESS TRUST OF INDIA
New Delhi, July 1: Monitoring agency IDBI has mooted a rehabilitation package for sick VK Modi group company Gujarat Guardian Ltd (GGL), envisaging GGL's accumulated losses being wiped out by 2002-03.
GGL is a joint venture between Modi Rubber Ltd (MRL) and Guardian International of the US. It was the first Indian company to begin manufacturing float glass in 1993, but due to myriad financial and market compulsions, was declared sick in 1998.
"On consideration of facts and the material on record, we decide it is practicable for GGL to make its net worth exceed accumulated losses within a reasonable time," the Board for Industrial and Financial Reconstruction (BIFR) said in its latest hearing.
As per the package, liquidated damages of Rs 84 lakh for IDBI between April 1, 1997 to March 31, 1998 have been either waived or refunded and interest on outstanding foreign currency loans shall be at 15 per cent for this period.
Also, foreign currency (FC) loans due between April 1 1998 and September 30, 1999would be either rescheduled or converted to rupee-tied FC loans, repayable in quarterly instalments at 15 per cent interest rate.
The involved financial institutions shall sanction additional Rs 16 crore rupee loan to compensate for SBI reneging on its guarantee for $4 million external commercial borrowing (ECB) envisaged in the earlier package.
Gujarat Guardian Ltd was a pioneer in the float glass industry but began facing problems due to slow market acceptance of its products.
Initially, the company approached IDBI for a financial restructuring package in 1994 which envisaged raising $27 million through external commercial borrowings (ECBs) in two tranches for part pre-payment of institutional rupee loans.
While the first $15 million tranche was successfully raised, subsequent ECB offerings ran into trouble and GGL requested further rescheduling of rupee loans.
Adding to the company's woes, float glass prices slid from August 1996 onwards after a decline in world prices, resulting in heavy lossesfor GGL in 1996-97.
Due to subsequent inability to raise money via ECBs, the company's net worth eroded and it was declared sick by BIFR in 1998.
Commencing production in 1993, GGL was initially plagued by low capacity utilisation of 61 and 87 per cent respectively in the first two years of operations.
In addition to sliding prices for float glass during this period, GGL's cost of project was being funded by a high debt-equity ratio of 2.2:1.
This heavy debt burden coupled with a large fc exposure resulted in high financial cost for the company.
As per the revival package approved by BIFR, certain conditions have been attached to the company's accumulated losses being wiped out over the stipulated time period.
Banks associated with Gujarat Guardian Ltd (GGL) shall grant need-based enhancement of working capital limits.
"Any fresh assistance to be granted by the financial institutions shall be secured by first pari passu charge on all the fixed assets of the sick company and personal guarantee ofVK Modi," the BIFR order states.
Also, GGL has been asked to vest the right of recompense with the institutions with respect to the sacrifices undertaken by them.
GGL has been barred from undertaking any new project, making investment or acquiring any equipment on lease without the prior permission of institutions during the rehabilitation period.
It has also been asked not to pay royalty on its sales so long as payment of principal instalment, interest or any other money is due and outstanding to institutions, the order says.
It has also been asked not to declare dividend on its share capital as long as institutional term loans are outstanding.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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