Dunlop Seeks Fi Help For Revival Package

Tyre major, Dunlop India's newly appointed managing director P J Rao is believed to have sought 'co-operation and guidance' from domestic financial institutions including Unit Trust of India, Life Insurance Corporation and General Insurance Corporation to workout a financial revival package for the beleaguered company.

The M R Chhabria-controlled cash-strapped company is also negotiating with United Bank of India, which is part of the bankers' consortium, to enhance its working capital limits and overcome the financial constraints affecting its production and financial performance.

Sources said negotiations with General Insurance Corporation have already been initiated by the company. Subsequently, the management will also approach the other two --LIC and UTI, soon. All three are the financial institutional shareholders with about 33 per cent stake in the company.

 

"Moreover, to solve the financial problem, the managing director is regularly in touch with banks and financial institutions. The company requires nearly Rs 120 crore as the working capital as against Rs 38 crore disbursed by the bankers' consortium despite an in-principle agreement for a substantial upward revision", the source told Business Standard. All efforts are underway to divest or sell the Mumbai properties as the company needs to raise Rs 100 crore immediately.

This has come in the wake of the management decision to restructure its business operations in line with the emerging macro-economic scenario and compete with leading international players. "In a line of business where leading international players are increasingly folding their brands on domestic turf, the company's production cost have to be intensely competitive", the source said.

"But while immediate fund mobilisation will only help the company to achieve higher capacity utilisation and reduce losses in the short-run, it will not have any affect on the company in the long-run if the business continues to be fundamentally unviable", sources said.

A long-term revival package including rationalisation of the workforce is being worked out simultaneously.

"Contemporary practical solutions will have to be found around archaic statutes and conventions. The company should be allowed to operate in a "productivity-friendly" environment, for that is the worker friendly regime", he pointed out.

Dunlop India registered a Rs 19.20-crore net loss in the first half of 1997-98 due to under-utilisation of capacity at less than 25 per cent, under-absorption of overheads and non-availability of requisite bank finance.

For its proposed US$25 million external commercial borrowing, the company is talking to international bankers and institutions.

Though the turmoil in Asian markets is delaying the ECB mobilisation, the company is ready with encumberance-free collateral against the ECB.

Meanwhile, the company received an assurance from its major shareholder, Dunlop Rims & Wheels (DRW) for full proportional subscription of its rights issue amounting to Rs 66 crore.