The AC Muthiah Group, promoters of cash-strapped Southern Petrochemical Industries Corporation Ltd (Spic), has pledged its entire stake in majority of Spic?s listed subsidiaries, including its two petrochemical ventures ? the Manali Petrochemical and Tamil nadu Petroproducts.
The group has six listed subsidiaries ? Tuticorin Alkali Chemicals and Fertilisers, Manali Petrochemical, Tamilnadu Petroproducts, First Leasing Co of India, SPEL Semiconductors Ltd and SICAL Logistics. The group holds majority stake in these firms through Spic, its troubled flagship company.
Market sources said Spic pledged its entire stake in its publically traded companies? Tamilnadu Petroproducts Ltd, Manali Petrochemicals Ltd and Tuticorin Alkali Ltd. It pledged its entire 45.15% stake in Tuticorin Alkalies, 38.29% in Manali Petrochemicals Ltd and 16.93% stake in Tamilnadu Petroproducts Ltd. Tamilnadu Petroproducts is a joint venture between Spic and Tamil Nadu Industrial Development Corporation (Tidco), the industrial promotion agency of the State government.
Tidco holds close to 17.61% in the company. Spic is the sole promoter of both Tuticorin Alkali Chemicals & Fertilisers Ltd and Manali Petrochemicals Ltd. Regulators had earlier shot down a proposal by Spic to merge Tuticorin Alkali with itself, saying the move would put the shareholders of the profit making Tuticorin Alkali at a disadvantage.
Spic also pledged part of its stake in First Leasing Company of India Ltd. According to information available with FE, Spic had pledged close to half of its holding in the company some time back. The company’s holding in Tuticorin Alkali was about 27.82% of which it had pledged 11.41% stake. However, Spic has not pledged its stake in SPEL Semiconductors Ltd, in which it holds close to 56% stake and Sical logistics Ltd (Sical), in which it has a majority stake, a tad lower than 33%.
The AC Muthiah Group had also pledged close to 10% stake in Spic itself. The Group’s holding in Spic as on the quarter ended March 31, 2010, was about 31.45%.
The management is in the process of reviving the fortunes of the group by putting its flagship company Spic back on the rails through an Arcil-sponsored corporate debt restructuring programme. Under the package, the main promoters – the AC Muthiah group – would invest an additional Rs 150 crore in the company’s equity, through their wholly-owned subsidiary Ficon Holdings Ltd, Mauritius by way of a preferential issue before September this year. Post issue, the group’s holding in the company would go up to 44.50%, from the current level of 17.12%. Tidco is the other promoter of the company which holds 6.74% stake in Spic. However, post issue, Tidco’s stake in the company would come down to 4.51% since it is not subscribing to the preferential issue.
Spic was forced to shut both its ammonia and urea plants way back in 2006 as its lenders refused to open fresh letters of credit (LCs) to meet its working capital requirements, after two of its bankers ? Tamilnad Mercantile Bank and Punjab National Bank (PNB) approached the Debt Recovery Tribunal (DRT), Chennai, for recovering dues from the company. Spic has a secured debt to the tune of Rs 4,101.17 crore and another Rs 481.44 crore in unsecured loans on its balance sheet.
Spic found itself between a rock and a hard-space when IOC, taking a cue from the bankers, too had stopped supplying feedstock to the company. The company has recently said that it would restart production of both ammonia and urea-based fertilisers.