| uphill task
Mumbai, Dec. 15: India Cements Ltd has proposed a ballooning interest rate structure to financial institutions led by the Industrial Development Bank of India (IDBI) that initially entails a lower interest burden, which could go up at a later stage.
Sources close to the Chennai-based cement major said this proposal forms part of the debt recast plan currently being discussed by the FIs’ corporate debt restructuring cell.
India Cements is understood to be looking at a period of five years to reduce its interest burden. The company’s interest costs for the financial year ending March 31, 2002 stood at around Rs 200 crore, up from around Rs 188 crore last year.
Even as senior Indian Cement officials refused to comment on the entire issue, the company has indicated to the institutions that it is willing to even dispose of assets, particularly the non-core ones, to repay its debt.
“While lower interest rates will be paid initially, the expectation is that as the company’s performance gets better over the next couple of years, it will be in a position to pay even more,” sources added.
It is expected that such a restructuring package coupled with other moves the company has embarked upon in the last one year would lead to a better bottomline in the years ahead.
Earlier this year, the company had sold close to 95 per cent of its subsidiary Sri Vishnu Cements Ltd (SVCL), to Zuari for an enterprise value of Rs 385 crore, a large part of it which was pre-paid to the lenders.
This sale led to a moderate reduction in its overall debt levels that came down to Rs 1,500 crore. Simultaneously, the company also took recourse to other measures that included offering a voluntary retirement scheme (VRS), to bring down its costs.
India Cements acquired SVCL in the course of its hostile bid for Raasi Cement, which held a large stake in SVCL. But while the company took recourse to large-scale borrowings to finance its ambitious take-overs, a spurt in cement capacities and drop in their prices had an adverse impact on its balance sheet.
For the first half of the current fiscal ending September 30, its losses shot up to Rs 91 crore compared with Rs 19.2 crore a year back. Total income too came down to Rs 450 crore from Rs 581 crore last year.