Sekurit Saint Gobain Readies Rejig Plan
Sekurit Saint Gobain India Ltd, formerly Maharashtra Glass & Agro Ltd, has embarked on a restructuring programme to reduce costs and improve the capacity utilisation of its laminated safety glass unit at Chakan near Pune.
The restructuring exercise is aimed at turning around the loss-making company. The major cause for drain at the company has been the high interest cost on borrowed funds and the huge accumulated losses that have substantially eroded the company's net worth. Its management had to report the matter to the Board for Industrial and financial Reconstruction (BIFR), as required under Section 23 of the Sick Industrial Companies (special provisions) Act, 1985.
It has borrowed funds totalling Rs 23.6 crore and the interest cost of this works out to an average of around 22 per cent per annum. The company's debt is more than two-and-a-half times its net worth.
In the financial year 1997-98, the interest cost for the company worked out to Rs 5.01 crore as against Rs 3.97 crore in the previous year. Accumulated losses as of March 1998, rose to Rs 15.49 crore, which exceed 50 per cent of the peak net worth of the company during the preceding four financial years. The company plans to retire its high cost debt by going in for a rights issue in the ratio of 3:2 (three equity shares for two held). The company will soon issue 1,95,22,650 equity shares on rights basis at Rs 10 per share. It has decided to increase its authorised share capital from Rs 18 crore to Rs 35 crore.
The company defended its move to come out with a rights issue on the ground that it will prevent it from being declared `sick'. The management was optimistic that the automobile industry will witness strong growth in the years to come and since Sekurit of France, a world leader in laminated glass, has its full backing for the company, the long-term success of Sekurit Saint Gobain is assured.
The company has already initiated moves to increase its laminated glass f France had earlier increased its stake in the local firm from 26 per cent to 51 per cent. The French group had purchased 45,53,700 equity shares at a price of Rs 19.75 per share (including Rs 9.75 premium per share) in December 1997, thus taking over the complete management control.