Bankers' Move On Jct Next Week

The Industrial Finance Corporation of India (IFCI)-led bankers' consortium of JCT Ltd is meeting on coming Tuesday to take a decision on the restructuring plans submitted by the M M Thapar flagship. Indications are that the consortium may agree to the rejig plans despite the company's failure to find out any buyers for its steel division, composite textile unit in Ganganagar and liquidate its real estate assets in Mumbai and Phagwara so far.

According to sources at financial institutions (FI), the consortium may give the company some more time to conclude the deals considering the prevailing depressing market conditions.

Though JCT is understood to have made some progress in its negotiations with Tata Steel for the sale of the former's steel wire unit located in Rajasthan, there is still no signs of the deal finally going through.

 

Though Tata Steel has hired a consulting agency to do the due diligence in the steel unit, the talks are understood to be stuck on the crucial issue of pricing.

On the real estate front, JCT is understood to have given up its plans for the time being because of the highly depressed market conditions.

The bankers' consortium, consisting of 11 banks and three leading (FIs), has been demanding an upfront payment of a part of the company's outstanding debt repayment dues as a precondition for any rescheduling of its debt repayments.

The repayment reschedule for JCT's Rs 600-crore loan is one of the crucial aspects of the company's restructuring plan. JCT's efforts to sell off plants and the real estate assets are aimed at mopping up the required funds to make the upfront payment to the FIs and banks.

The Punjab national Bank and Canara Bank are among the banks which have exposures in the company.

The consortium, however, is understood to be positive about the company's proposal to demerge its textile and synthetic fibre divisions and follow independent growth plans for both these core activities.

With demand growth in these two sectors expected to be high in the coming years, JCT could do well in these two areas provided its working capital problem is taken care of.

According to JCT officials, while the synthetic fibre division of the company is currently operating at 120 per cent capacity utilisation level, its textile division is operating at almost 100 per cent capacity utilisation, generating high-cash flows. The huge interest burden and the losses in other divisions are, however, eating into the cash-flow generated by these two divisions, officials pointed out.

The restructuring exercise in the M M Thapar flagship was necessitated after the deal between Polysindo, the Indonesian petrochemical major, and JCT for the sale of the latter's polyester fibre plant in Rajasthan fell through.

Polysindo had disagreeing to JCT's revised sale price of Rs 504 crore for the plant. The restructuring plan is primarily aimed at paying back Rs 600 crore of loans which the company has to pay to various financial institutions and banks. Out of that, Rs 200 crore is the overdue to the banks and financial instituions, and the company has proposed a reschedulement of this amount.