Calcutta, Nov. 24: Pawan Ruia of Ruia Cotex, who has emerged as the frontrunner in the race to take over Dunlop India Ltd, faces a litmus test. His offer, along with the proposals of other bidders, will be benchmarked against a revival plan, being prepared by the State Bank of India (SBI), for the ailing tyremaker.
The SBI plan, which is being based on a study carried out earlier by the National Productivity Council (NPC), will be submitted to the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) that is due to meet on December 14 to discuss the issue.
The Ruias and a couple of other bidders, including JK Tyres, Hero Honda and the Caparo group, are reportedly in talks with the Chhabria-owned Jumbo Group to buy out the tyre businesses.
Nothing precludes a deal between the Chhabrias and the bidders, but it will have to pass muster before the Board for Industrial and Financial Reconstruction to have any tangible effect.
Back in February, the National Productivity Council was appointed by the Union labour ministry in consultation with the management to carry out a study on Dunlop’s revival.
The revival plan that is being drawn up by SBI is expected to cost Rs 400 crore.
The central and the state governments will provide a concession of Rs 80 crore on account of electricity duty, sales tax and a few other levies. The new promoter will have to chip in Rs 125 crore to Rs 150 crore to re-start the factories.
“It will require at least Rs 22-25 crore to bring the machines back into operational condition,” senior SBI officials said.
SBI is also taking into consideration the idle assets that the company has across the country. A rough estimate shows that the company has nearly Rs 100 crore fixed assets, which include properties in Mumbai, Chennai and Calcutta.
There are two prime properties of Dunlop in Calcutta ' the sales office on Mirza Ghalib Street and King’s Court on Chowringhee Road.
The promoter’s stake in the company is placed at 76.48 per cent. Dunlop Rims & Wheels, the foreign promoter of Dunlop India, holds 16.70 per cent in the company. The remaining 59.78 per cent is held by the Chhabrias.
The AAIFR meeting is crucial for the company. Bengal labour minister Mohammad Amin and industrial reconstruction minister Nirupam Sen have been asked to attend the meeting.
The four bankers of the company ' SBI, Federal Bank, Catholic Syrian Bank, and Bank of Tokyo Mitsubishi ' will also attend the meeting.