Fis To Review G P Goenka Group Mergers

Financial institutions led by Industrial Finance Corporation of India (IFCI) have decided to take a fresh look at the proposed merger plan between the G P Goenka group companies -- Consolidated Fibres and Chemicals and Star Paper with National Rayon Corporation (NRC) -- which had already been cleared in principle and the share swap ratio agreed upon among the companies.

The financial institutions have asked the G P Goenka group to submit a revised package on Consolidated Fibres and Chemicals (CFCL) on a 'stand-alone basis', sources told Business Standard on conditions of anonymity. The source, however, refused to disclose the reason behind the sudden change of decision. Group chairman G P Goenka was unavailable for comment.

 

Moreover, it is not clear whether the change of decision indicates that the earlier merger plan has been totally ruled out and the institutions will now focus only on the restructuring plan for CFCL.

Nobody is also willing to guess whether the FIs will consider the two proposals and come to a decision on the merit of any one proposal which might be in favour of the merger plan of the three Goenka group companies.

In early May, the FIs had cleared the merger of CFCL and Star Paper with National Rayon after months of debate and discussions among the heads of institution and group officials. The amalgamated entity, had it been cleared, would have posted a turnover of Rs 700 crore on an enhanced equity capital. On the basis of the merger plan approved by the FIs, 20 equity shares of National Rayon would have been exchanged for 170 shares of Consolidated Fibres, and 19 shares given against a holding of 20 shares in Star Paper.

The draft merger plan had also envisaged reducing the share capital of Consolidated Fibres by about 25 per cent ---from Rs 62.41 crore to Rs 46.81 crore -- through a complicated financial institution exercise which includes a FI loan conversion into equity and fresh infusion of Rs 25 crore by the principal promoters of Consolidated Fibres, the Duncan group.

FIs had also agreed to a debt restructuring programme of the company, including conversion of a loan component of Rs 62.23 crore into equity and waiver of a portion of the interest accrued on loans in accordance with terms and conditions of the merger.

"The change in decision, which has thrown a spanner in the group's plan, means that the revised restructuring plan for CFCL, including the waiver of interest accrued on loan, will start afresh", the source added.

If the restructuring package for CFCL alone is cleared, the company will not face any difficulty in implementing the same as it registered a turnover of Rs 35 crore in the first five months of the current financial year 1997-98 and has made a cash profit of nearly Rs 1.77 crore, the source observed.

It is not clear whether the change of decision indicates that the earlier merger plan has been totally ruled out.