"Sanghi Polyester has been defaulting on the payment for more than two yearsnow. Last year, institutions worked out a reschedulement package. But thecompany could not stick to the rescheduled payment format. Hence, IDBI isexploring the possibility of recalling the loans," a senior IDBI officialsaid.

The company's promoters were asked to bring in some funds as a preconditionfor approving the reschedulement of loans. However, the promoters could notcomply with the stipulation leading to default on the rescheduled package,the official said. As per the package, the date for the repayment wasextended to October 1999, from around the same time in 1998.

The company did not make any payments in October. The company has also notcome up with a specific proposal seeking another round of reschedulement.The outstanding amount including interest (Rs 11 crore) now stands at Rs 53crore, the official said. With the polyester market in the doldrums, manypolyester companies have been defaulting on loans and could not comply withthe institutions' demand for a fresh infusion of funds. For instance, FIshad earlier asked the Rankas-controlled Modern group for the infusion offunds of over Rs 50 crore for approving a reschedulement package.

The company could not mop up the initial funds and is in the process ofdrawing up a fresh restructuring proposal seeking an extension of therepayment period and waiver on interest charges. The cash-strapped Moderngroup's total outstanding with financial institutions stands at Rs 977crore. The same was the case with Raymond Synthetics which defaulted on thepayment for a much longer period. When the company went down in the dumps,FIs took the initiative of roping in a buyer which led to RelianceIndustries buying out the plant.

The deal also included a complete payment of institutional outstandings,sources said. Though Sanghi's polyester filament yarn is in operation, thecompany is still in the red due to recession. The PFY plant, located inHyderabad, has a capacity of 55,000 tonnes per annum.

The company's plant is unlikely to be a target for RIL as it is situated inthe South, industry observers said.