The Telegraph
Since 1st March, 1999
Email This PagePrint This Page
IDBI guns for Mangalam Cement

Calcutta, Dec. 12: The Industrial Development Bank of India (IDBI) has shot off a letter to Mangalam Cement — a company promoted by Basant Kumar Birla that has been defaulting to its lenders — threatening legal action under the recently passed securitisation legislation that permits banks to seize assets of wilful loan defaulters and auction the property to recover loans.

In its letter dated December 6, IDBI says it will be “constrained to take legal action as would be deemed necessary, including any of the measures as provided under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Bill 2002,” if Mangalam Cement fails to clear its dues within 15 days.

Senior officials of the group said IDBI’s aggression was “completely unwarranted” as the company had been negotiating with its lenders for a one-time settlement.

Just two days ago, the Reserve Bank said it would be devising another one-time settlement scheme to enable defaulters to clear their dues before the banks start to close in on them.

Birla Building has clearly been shaken by the move. Sources close to the Birlas said the move was aimed at putting pressure on the family. “We understand the move was triggered by the financial institutions’ differences with Grasim on Larsen & Toubro, and this is a ploy to intimidate the family.”

Besides seeking to clear its dues by way of a one-time settlement, the management has been trying to sell the company off. Its efforts, however, have not been successful.

“We had offered to pay the principal and had sought waiver of the interest. The latest move shows the lenders — particularly IDBI — were not negotiating in good faith,” they said.

Officials said, the letter was received on Wednesday, and the company had yet to decide on its response. It is understood that that company will take a final call on the matter once its chairman returns to Calcutta. The Birlas hold around 22 per cent in the company.

“If IDBI thinks it can run or sell a cement plant better than us, let them have it. We are not going to pay up anything, and will also stop all negotiations with them,” they added.

Mangalam Cement owes about Rs 180 crore. Its entire net worth has been eroded and the company has been declared a “sick industrial unit” by the Board for Industrial and Financial Reconstruction (BIFR). IDBI and ICICI Bank are the key lenders.

Mangalam Cement suffers a loss of Rs 2.5 crore per month. It has a total installed capacity of 1.1 million tonnes in two plants near Kota, Rajasthan, and had earned close to Rs 280 crore in revenues in the last financial year.

A number of leading cement manufacturers — including Italcementi and Grasim — had taken a close look at the assets of the company in the recent past, but were intimidated by the company’s indebtedness. Company officials ruled out any possibility of sale in the foreseeable future.

Group officials said the notice was of “little or no consequence” to the management of Mangalam Cement. “We are not concerned. It is not clear yet whether the other lenders — namely ICICI and IFCI — have teamed up with IDBI in initiating legal action against the company. IDBI, on its own, cannot adopt the measures provided under the Securitisation Bill,” they added.

Email This PagePrint This Page