KERA SINTER, LTD. OBJECTS & ACTIVITIES: Manufacture of ceramicc floor andd wall tiles. PROMOTION: The Company wass promoted in joint sector by Andhra Pradesh Industrial Development Corporation (APIDC), Kerabedarf GmBH, West Germany and K.S. Reddy and P. Lakshmiah. FOREIGN COLLABORATION: The Company entered into a collaboration agreement with Kerabaddarf GmbH, West Germany (KGH) under which KGH were to provide all the necessary technical know-how and engineering services for the manufacture of vitreous glazed and non-glazed floor and wall tiles. In consideration of their services KGH were to be paid a lump sum fee of DM 4,00,000 in equal instalments and a royalty at the rate of 3% on export sales and 1% on domestic sales for a period of 5 years, after commencement of commercial production. OPERATIONS: The plant went into trial production in the first quarter of 1985. Commercial production was delayed due to certain technical problems encountered during the trial runs. During 1987-88, the production increased by 124.75% to 3,805 tonnes from 1,693 tonnes in the previous year. It again went up by 27.33% to 4,845 tonnes during 1988-89. With the rehabilitation packager sanctioned by financial institutions, the Company could solve some technical problems by modifying kiln car design, kiln car furniture, ceramic blanket insulation, etc. A diesel generator set was also acquired to meet contingency power requirements. During 1989-90, the Company achieved a turnover of Rs.233 lakhs. But due to persisting financial and other problems the operations were closed on 5th October, 1990. The Company was only involved in the selling of their products during the year 1990-91. Production for the year amounted to 923 tonnes as against 4.603 tonnes in 1989-90. FINANCE: IDBI, under Project Finance Participation Certificate Scheme with IFCI and ICICI sanctioned a term loan of Rs.458 lakhs. Portions not exceeding 20% of this term loans would be convertible into equity capital of the Company during the period from 1st July, 1989 to 30th June, 1991. An additional term loan of Rs.95 lakhs was sanctioned by IDBI to finance partly the overun in the project cost. ISSUE OF NEW EQUITY SHARES: In order to finance partly the overun in the project cost, the Company issued at per new equity shares for a total value of Rs.67.21 lakhs during November-December 1987. Out of the total issue , equity shares worth Rs.33.00 lakhs were to be subscribed for by co-promoters and associates and the balance of Rs.34.20 lakhs was to be raised by a rights offer of 3,42,000 shares at par to the public shareholders in the ratio of 3:10. However, APIDC expressed its inability to participate in the equity to be brought in by co-promoters and associates. The consequent gap of Rs. 16.85 lakhs was filled up by way of issue of convertible debentures to UTI on private placement basis. Subsequently, promoters other than APIDC took up 1,39,500 shares. Out of the rights to the public shareholders, only 14,716 shares were taken up. The balance 3,27,284 shares devolved on underwriters (3,06,184 shares on IDBI and 21,100 shares on others). CONVERTIBLE DEBENTURES/LOAN: In view of APIDC's inability to participate in the additional equity for financing the overrun in the project cost, the Company issued 16,850-15% secured redeemable convertible debentures of Rs.100 each to UTI on private placement basis during 1987-88. The debentures would be fully convertible at par at the option of UTI during the currency of the debentures by giving 6 months' notice at one or more stages. Subsequently, with the requisite permissions, the total amount raised was in the nature of convertible term loan. REHABILITATION: During October 1988, a ten-year rehabilitation programme was sanctioned by IDBI under project Finance Participation Certificate Scheme together with IFCI and ICICI with cut off date as 1st April, 1988. State Bank of India also agreed, in principle, to provide need based working capital. The Scheme envisages a term loan assistance of Rs.122 lakhs, reduction of interest, funding of interest till the cut-off date, conversion of 50% of such accrued interest into equity capital, etc. The package also included a promoters contribution of Rs.13.40 lakhs in the form of additional share capital. The package became operational from January 1989. During 1989-90, the State Bank of India had not given official approval to the package due to which, the rehabilitation programme could not be implemented fully. SICK INDUSTRIAL COMPANY: The Company made a reference to BIFR on 18th December, 1990. On 27th February, 1991, BIFR declared the Company as a Sick Industrial Company under the provisions of the Act and appointed IDBI as operating agency for preparing a scheme for rehabilitation of the Company.