The company's attempts to sell the synthetic fibre units to Indonesian synthetic fibre manufacturer Polysindo fell through, owing to differences over the sale price, depriving JKS of the much-needed cash to pay off the financial institutions. Following a suit filed by the financial institutions for the recovery of outstanding dues, the focus has now shifted to selling offthe company's 1.5 million tonne grey cement plant and its 0.18 million tonne white cement plant, both of which are located in Rajasthan.

The past business diversifications and capacity expansions have backfired badly against JK Synthetics. All its lines of business have contributed to its desperate position by their non-performance. The synthetic fibres business was hit severely last year due to the fall in fibre prices. Two of its synthetic fibre plants at Kota and Jhalwar, both in Rajasthan were shut down because of their economically unviable operations. This has made any attempts to sell these units, subsequent to the Polysindo deal, a very difficult proposition. The cement business also had its own constraints of demand location and limited pricing power. The company could not even earn a minor operating profit in 1998-99. In the previous year, it managed to eke out a minor operating profit at a margin of two per cent.

If a revival of JKS is being considered, then a better bet would be retaining thecement properties, rather than the synthetic fibres units which have seen almost all smaller players put out of business. But even if these units were retained within the company, chances of a recovery are slim, for the company has consistently under-reported its real position in the past. For example, the loss reported for 1997-98 was Rs 155 crore, while the loss reported for 1998-99 was Rs 145 crore, on a turnover of Rs 551 crore. But the real picture was something else altogether. There has been massive under-reporting of expenditure especially on account of interest and non-provision of certain employee benefits, which has helped cover losses to some extent. In addition, there has also been non-compliance in maintaining various records. The under-provided amount on account of interest was Rs 25 crore for the year, while the total accumulated under-provision for the year is Rs 78 crore. The net loss for the year would have been at least Rs 170 crore, if just the interest was fully provided for.

The bestoption would be to go in for a liquidation of assets. Attempting any other course of action such as trying to refloat the company with any additional equity infusion, restructuring of outstanding debt and funding the unpaid interest would be futile, considering the unviability of its main fibres business and the large-scale window-dressing that has obfuscated the real position of the company.