Jk Corp Synthetic Unit May Fetch Only Rs 50 Cr: Idbi

The restructuring proposal of the Hari Shankar Singhania-controlled JK Corp hinges crucially on the sale of its synthetic division, which is expected to fetch about Rs 150-175 crore.

However, a report on the company prepared by the Industrial Development Bank of India (IDBI) suggests that it could realise only about Rs 50 crore out of the expected projection. Moreover, considering the depressed market situation, the IDBI report states that there could be a delay in getting a suitable offer for the plant.

Even after inputting Rs 50 crore to its balance sheets after the sale of its synthetic division, the report says that JK Corp would have a closing balance of Rs 86.21 crore at the end of 1999-2000. In case, the company is unable to sell its synthetic division, its closing balance would be only Rs 34.28 crore.

 

The report further adds that the company's requirement of funds towards principal and interest obligations during 1998-99 and 1999-2000 work out to Rs 717.43 crore. Besides, the company is also required to pay interest on proposed additional borrowings amounting to Rs 20.69 crore, deploy Rs 135 crore towards building up of current assets to the required level and incur Rs 40 crore towards essential capital expenditure. Thus, the total requirement during 1998-99 and 1999-2000 works out to Rs 913.12 crore.

As against the requirements, internal accruals/other receipts are placed at Rs 397.98 crore (excluding realisation from synthetic division from 1999-2000) leaving a shortfall of Rs 515.14 crore. In order to bridge this shortfall coupled with a closing balance of Rs 86.21 crore aggregating Rs 601.35 crore, the company has proposed a restructuring plan to the institutions.

The plan includes subscription to NCD's to the tune of Rs 257 crore on a pro-rata basis by the financial institutions, besides tying up with other banks for another Rs 28 crore. "The proposed NCDs will be at zero interest for 18 months and would carry interest at the rate of 19.25 per cent per annum (approximately) thereafter, so as to give an effective yield of 15.5 per cent exclusive of interest tax. NCDs are proposed to be redeemable in 20 quarterly instalments commencing from 2002", states the IDBI report.

Besides, JK Corp has also sought rescheduling of repayment of its debt (term borrowing including NCDs), which stood at Rs 1081 crore as on March 31, 1998. Besides, it has also sought reduction in the rate of interest on its outstanding liabilities.

"The average cost works out to 17 per cent. In view of the adverse market situation which precludes any appreciable upturn in demand/prices for the company's products in the short run, the company has sought relief by way of reduction in interest rate. It has requested for substantial reduction in interest rate to 14 per cent. However, keeping in view the cost of raising funds by institutions, it is proposed that institutions/banks might consider reduction in interest rate by 1.5 per cent over the document rate, so that the effective rate would work out to 15.5 per cent per annum", the report states.