Essel Pack To Lease Vasind, Wada Properties To Banks

The Subhash Chandra-promoted Essel Packaging proposes to mortgage all its movable and immovable properties in Vasind, Murbad and Wada in Maharashtra in favour of Industrial Development Bank of India (IDBI), Industrial Credit and Investment Corporation of India (ICICI), State Bank of India (SBI), Standard Chartered Bank and ANZ Grindlays Bank.

The company has also decided to raise it stake in its joint venture in Egypt -- The Egyptian Indian Company for Modern Packaging SAE -- from the current 35 per cent to 75 per cent. This would entail an additional investment of $500,000 in the venture.

Essel Packaging will seek the consent of its shareholders for these moves at its annual general meeting (AGM) being held on June 12. The AGM will be held at the companies registered office in Vasind.

 

The proposed mortgage of the company's properties is designed to further secure loans taken from banks and institutions, as provided for in the loan agreements with IDBI, ICICI and the bankers, and the debenture trust deed with IDBI debenture trustee cell. Essel Packaging has availed of a corporate loan of Rs 15 crore from IDBI and a rupee term loan of the same amount from ICICI. It had also privately placed 13.75 per cent secured, redeemable, non-convertible debentures of Rs 100 each aggregating to Rs 10 crore with Banque Nationale de Paris. The trustee for the debenture issue is IDBI.

Besides, the company has availed of enhanced working capital limits from SBI (Rs 26.25 crore), Standard Chartered (Rs 10.50 crore) and ANZ Grindlays (Rs 2.84 crore). The loans and the debenture issue were utilised to fund successive enhancement of capacities at the company's factories in Vasind, Wada and Murbad.

The Egyptian joint venture, which manufactures tubes, was established in 1993-94 with an annual capacity of 20 million tubes, primarily to cater to the requirements of Proctor & Gamble in Egypt. Essel Packaging has till date invested Rs 39 lakh and holds 35 per cent of the equity in the joint venture.

The company now sees a potential for this unit to emerge as a major regional player in the Egyptian and African markets. It would therefore install additional tools to cater to the requirements of the region and eventually expand tubing capacities at a later date. Unilever (Egypt) has already started procuring tubes from the venture.

At the company's extra-ordinary general meeting on March 11, 1997, the shareholders had approved the proposal to increase the stake in the joint venture to 55 per cent.

However, after negotiations with the joint venture partner in Egypt, Essel Packaging has now decided to increase its stake to 75 per cent.

The increase in stake is subject to approval of the Union government under Section 372(4) of the Companies Act, 1956, and clearances from the Reserve Bank of India and the consortium of bankers.