This has forced the company to go in for borrowings to part-finance the Rs 195 crore project at Vadodara. The company has finalised the debt raising plan from banks and financial institutions at a coupon of around 11.5 per cent.

"A steep fall in the value of our shares over the past few weeks has forced us to drop the plan to raise funds through the equity placement route," joint managing director, BD Aggarwal told The Financial Express.

"As a result of the drop in the stock value, we would not be able to charge the premium we were looking at through the proposed placement," said Aggarwal.

Aggarwal claimed that the alteration in the financing pattern will not affect the 12,600 tonnes per annum project at a capital outlay of Rs 195 crore. The plant is expected to commence commercial production by 2001, he said.

Vikas WSP had earlier firmed up its plan to raise money through private placement of equity to FIIs such as Morgan Stanley, Genesis Investment Management, Zurich AMC and Chescor. FIIs currently hold nearly 20 per cent stake in the company's equity base of around Rs 10 crore.

Apart from the FIIs, SBI Mutual Fund and Unit Trust of India, which currently hold close to 17 per cent, were also slated to pick up additional equity through preferential allotment. The EGM, to take shareholders approval, was scheduled for the third week of this month.

The company had earlier firmed up plans to issue 12 lakh fresh equity shares at a price of Rs 1,100-1,200 per share which would not be possible now in wake of the share price crashing to around Rs 300.

As per the new financing plan, the company is raising Rs 100 crore through debt from banks and FIs. Promoters will bring in Rs 45 crore and the balance Rs 50 crore would be financed through internal accruals.

The new plant will manufacture hydroxypropyle guar (HPG), carboxymethyle guar (CMG) and hydroxypropyle carboxymethyle guar CMHPG), which find application in oil drilling and exploration, natural gas exploration and latex paints. The Vadodara plant is expected to yield an additional turnover of Rs 500 crore in 2004-05.

Vikas is the world's second largest producer of guar polymer next only to UK-based Rhodia. It exports product to various countries including the US, UK, Germany, Switzerland, Brazil and Japan.