Stung By Losses, Kothari Sugars Trims Staff

Burdened by the huge Rs 44 crore loss for 1997-98, the Chennai-based Kothari Sugars and Chemicals Ltd, is in the process of pruning its workforce drastically.

Already, during the past year, the management staff strength has been reduced from about 100 to just 24 people, Bhadrashyam H. Kothari, chairman and managing director of the company told Business Standard. From three office locations in the city, the company now works out of just one premises.

While not willing to give details of the actual package offered to employees, he said, it resulted in substantial savings. But the full benefit of the package will only be reflected in the current year's balance sheet as all expenses have been already taken on the profit and loss account for 1997-98.

This year, the scheme is to taken up at the company's various plants. From about 900 workers in all its plants, the number is to be brought down by around 250 people by the end of the year.

"The package is in the process of being finalised now," he said.

Each division of the group, says Kothari, has been hit by a combination of technical and natural problems that have culminated in the group having to report a huge loss.

In the co-generation plant where the equipment supply was contracted to ABB and in the unique Cane Separation System KSCL has set up with US-based Amcane International, contract guarantees are likely to be invoked.

In the case of ABB, there was a delay of about 14 months, while in the case of Amcane, the equipment has not functioned to guaranteed levels. Negotiations for compensation are already underway with ABB and will begin with Amcane if problems are not set right by February next (when the extended guarantee period expires). The nitro-aromatics plant at Karaikal fell victim to the heavy rains, the polybutenes division suffered from a unremunerative prices of, both, raw materials and finished products.

The other major problem that Kothari has to tackle is the rising interest cost. For the group as a whole (turnover for 1997-98, 121.61 crore) the debt-equity stands at a phenomenal 4:1. This is to be reduced by half by the end of the current fiscal.

A rehabilitation package is being submitted to the banks and financial institutions for rescheduling and restructuring loans. Already one high-cost rupee loan has been swapped for a 2 per cent Yen-denominated ECB.

"There is no more scope for taking ECBs," he said when asked about the possibility of more such conversions this year.

The promoters have promised to bring in fresh equity, provided the financial institutions agree to a package. "We have already indicated our readiness to bring in fresh equity," Kothari added.

He was, however, confident of the FIs working out such a package as the company has had a sterling credit record thus far.

The average cost of funds is around 16 to 16.5 per cent and is consists of largely medium-term loans of three to five year tenor. These are now likely to be converted to 7-9 year loans.

If the first two quarters of the current year are any indication the company will not be able to come out of the red, assuming that there is no concession on the debt front from the banks.