Mangalam Cement Puts Fixed Assets Lease-Out Plan On Hold

The B K Birla group has put on hold its plans to lease out fixed assets of the Rs 215 crore cement manufacturing company, Mangalam Cement Ltd, to tide over the financial crunch affecting the company's bottomline. The leasing of assets was being contemplated for the payment of dues to domestic financial institutions and repayment of inter-corporate deposits.

The company had registered a net loss of Rs 28.69 crore in the last fiscal due to unremunerative cement prices, depreciation of the rupee and the exchange fluctuation. The additional burden due to the imposition of service tax on transportation and other services also affected the company's profitability during the last fiscal. Faced with mounting losses, the company has been exploring various possibilities including leasing out its land, building and factories near Kota, Rajasthan, to tide over the situation. The management had obtained the approval of the shareholders' and institutions for the move. "However, with the improvement expected in the cement prices in the current year, the proposal has been dropped for the time being," states the corporate review for 1997-98.

 

To meet its requirement of funds, the company has decided to issue 1.48 crore, 14 per cent optionally convertible cumulative preference shares (OCCPS) of Rs 10 each totalling to Rs 14.86 crore on a rights basis in the ratio of 1:1. The issue is being lead managed by ICICI Securities and Finance Company Ltd and will open on August 10. Post-issue, the shareholding pattern of the promoter group will remain unchanged at 21.90 per cent.

According to the letter of offer, the promoter group also proposes to acquire additional OCCPS beyond their entitlement if the issue is undersubscribed. The stakes of financial institutions and public holding, too, is expected to remain unchanged at 46.31 per cent and 30.99 per cent respectively. The company paid Rs 6.52 crore towards repayment of instalments of term loans and Rs 4.20 crore towards interest on term loans to FIs.