Southern Petrochemicals and Industries Ltd (Spic), the flagship company of the beleaguered AC Muthiah group, had pledged its entire holding in its subsidiary Tuticorin Alkali Chemicals and Fertilisers Ltd (TAC) way back in 2005, barely four years after the company went public. Spic chairman AC Muthiah is also the chairman of Tac. Both Spic and Tac are now not operational due to severe liquidity crunch. Tac depends entirely on Spic for its feedstock. Tac, in a regulatory filing on Friday, said that Spic, its sole promoter, had pledged its entire stake in the company way back in 2005, just four years after the company went public. According to the filing, Spic had pledged 66,80,113 shares of Tac aggregating 45.15% of its outstanding shares on July 27, 2005, which is exactly the stake the promoters are having in the now sick company. It is not immediately clear that the money so raised was used for what purpose. The other major stakeholder in Tac include Delhi Iron Steel Company, which holds 5.12%, South Indian Bank, IFCI, Amith Steels Ltd and Prakash Finance Pvt Ltd.
Tac has stopped production ever since its parent company Spic was forced to shut its operations after the lenders refused to provide any further working capital credit to the company. Spic has a total outstanding debt to the tune of Rs 2,300 crore while its assets were valued by Ernst &Young at Rs 1,550 crore.
The Supreme Court recently had dashed the final hope of the promoters to restart operation of Spic by setting aside an earlier order by the Debt Recovery Tribunal (DRT) directing the lenders to open a Rs 13-crore per month lifeline to Spic to meet working capital requirements. Banking sources said that they have no hope of recovering the outstanding debt from Spic unless the management comes out with a viable restructuring plan including roping in a strategic partner. Unless it happens no lender would be able to open any fresh line of credit to the company including working capital loans, they added.
As of quarter ended December 2008, Tac has a total turnover of Rs 2.53 crore and clocked a net loss of Rs 5.4 crore. It has been reporting net losses closer or higher to its net sales for the past six quarters in a row. Tac stock has been hardly traded for the past one year and remains at Rs 7 for quite some time. Its major products include soda ash, ammonium chloride and pesticides.