Southern Petrochemical Industries Corporation (SPIC), one of the oldest business houses from South India, today said it’s debt burden would come down by around Rs 1,360 crore if the creditors exercise the settlement scheme, which was proposed by the company.
It may be noted, the company had a liability to the tune of around Rs 3,0000 crore and it has been paying back the money by selling it assets, stake and through promoters infusion.
Addressing the shareholders in Chenani today, company’s Chairman Ashwin C Muthiah said that SPIC is in resurgence now.
Company’s profitability was affected due to huge debt and the company also had some efficiency problem in the plant, which is old and significant investment is planned to improve the efficiency and with the reduction in liability, company’s profitability will be better, said Muthiah.
“…I agree we had a lot of problem, I am being open about it. We had a huge liability of around Rs 3,000 crore, 47 lenders and hundreds of unsecured creditors. Today, we have only a handful of creditors and debt is hardly a few hundred crore,” said Muthiah.
According to the sources the burden would come down by around Rs 1,367 crore post the settlement with the creditors as well as past repayments to secured lenders/conversion of secured debts into equity.
Muthiah said, the liability can come down to around 10% of the coming level, though this depends upon the option that the creditors would exercise under the settlement scheme.
The company has been selling some of its assets and its stakes in few companies including Henkel, Manali Petro, SPIC SMO and others. Besides the company’s promoters were also infusing money.
The company has raised Rs 135 crore last year by divesting its stake in SMO and Manali Petrochemicals and was fully utilised to settle the secured lenders.
Even today, the company shareholders gave nod for SPIC promoters to subscribe convertible warrants, by infusing around Rs 60-70 crore.
The company is proposed to issue the convertible warrants to AMI Holdings Pvt Ltd, a company belonging to promoter group and promoted by Ashwin Muthiah, in two tranches. Post the two issues AMI Holdings in the company will be 18.31%.
Overall, post the issue the shareholding will change to the following pattern. While the main promoter M A Chidambaram Group stake will increase to 47.57% from 35.81%, another promoter Tamilnadu Industrial Development Corporation stake will come down to 4.34% from 5.32%.
Similarly, public shareholding will drop to 25.95% from 31.77%, The Bank of New York Mellon (custodians for Global Depository Receipts) will also come down to 8.44% from 10.33%.
Portion of the fund will be utilised to meet obligations for a scheme of compromise and arrangement to settle creditors, said Muthiah.
The company has recorded the highest allowed production of Urea at 6.2 lakh tonnes in 2011-12. Company's revenue earnings were at Rs 3,308 crore as against at Rs 1,743 crore a year ago, an increase of around 89%.
The company recorded a loss of Rs 6.31 crore as against profit of Rs 81.98 crore, a year ago. This was attributed to fluctuations in foreign exchange rates, for MAT related to previous years and the payment of finance charges to secured lenders.
On the outlook, Muthiah said, once the company is freed of its debt, the company sees itself returning to better results.
The new pricing policy stage III that expired in March 2010 continues to be applied now. A new Urea Investment Policy and a Modified Pricing Policy for existing units are expected to be announced by the government soon.
The Government is focusing on lowering the cost of production and subsidy burden. The thrust is to switch over to natural gas, which is cheaper feedstock compared to Naptha.
The company is planning to invest around Rs 100 crore to convert into Gas from Naptha. The portion of conversion would likely to get over by April 2013, according to sources.
Since the government would be allocating a part of the company's natural gas requirement, SPIC would become capable of handling dual feedstock - naptha and natural gas - during the course of the next fiscal, said Muthiah.