Though Godrej & Boyce appears to have a strong balance sheet for 1997-98, with reserves to the tune of Rs 202.71 crore on an equity of Rs 72 crore and a debt of Rs 217.85 crore, a substantial amount of the company's funds are blocked in investments in subsidiaries. Hence the liquidity problem, say analysts. However, it may be pointed out that dividend from these subsidiaries is over Rs 11.65 crore.

Another aspect of Godrej & Boyce's operation is that the company has generated a net profit of a mere Rs 27.86 crore on a turnover of Rs 731.55 crore yielding a RONW of 10.14 per cent. This is despite the fact that the company's net profit has risen a whopping 122 per cent over the previous year's net profit of Rs 12.50 crore.

In order to improve their debt-equity ratio, Godrej & Boyce, during 1996-97, made a rights issue at a premium of Rs 1,450 per share (face value of Rs 100) and obtained a total of Rs 24.7 crore. It also raised $3 million from Fuji Bank as ECB.

Industry analysts feel that one of the options before the company is to come up with another rights issue to fund part of the restructuring. Further, analysts feel that Godrej & Boyce's holding in group company Godrej Soaps, which stands at 67 per cent, could be diluted through a private placement, as another option to raise funds. The equity of Godrej Soaps is Rs 63.1 crore. A sale of around 10 per cent of the equity at the prevailing market price of Rs 63.70 per share will mean an inflow of around Rs 40.19 crore.

Another rumour doing the round is a possible exit of Godrej & Boyce from joint venture company Godrej Pacific Technology in which the company's stake is 51 per cent. Godrej Pacific Technology is engaged in the business of office automation products.

A faxed questionnaire to Godrej & Boyce managing director Jamshyd Godrej, on the possibility of diluting its holding in Godrej Soaps, an exit from Godrej Pacific Tech, and the group's funding plans, elicited no response.

Godrej & Boyce, which is the holding company of the Godrej group with expansive overseas operations, is said to generate funds through internal accruals for the restructuring proposals announced recently. It is an unlisted company which has sewn a series of joint ventures in new markets including Oman, Vietnam and South Africa. In India, it has eight business divisions which manufacture and market a wide range of consumer durables and industrial products.

The company's investment in the equity of the 60:40 JV Godrej GE Appliances was Rs 72 crore. The JV posted sales of Rs 793.94 crore in 1997-98 as against Rs 634.58 crore in the previous year. Godrej GE Appliances, which posted a loss of Rs 62 crore in 1996-97, jumped back in the black in 1997-98, with a profit of Rs 3.39 crore. While debt was high at Rs 280 crore, reserves were nil in 1997-98.

In addition to the recent announcement that GE was quitting from the joint venture, other restructuring announced by the Godrej Group includes, the buyout of Godrej Foods' 29 per cent stake in Godrej Pillsbury for a consideration of Rs 31.13 crore and the acquisition of Godrej Soaps' 22.5 per cent stake in Godrej Sara Lee for Rs 99.17 crore.