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Mr Ashwin C. Muthiah, Vice-Chairman, SPIC Ltd, flanked by Mr Babu Varghese, Managing Director (left), and Mr M.G. Thirunavukkarasu, Finance Director, at a press conference in Chennai on Thursday.

CHENNAI, April 4

SOUTHERN Petrochemical Industries Corporation (SPIC) expects to save Rs 60 crore on interest payment in the next couple of years consequent to a debt restructure plan agreed to by a consortium of bankers.

Under the scheme, SPIC would pay a concessional rate of interest of 8 per cent on its working capital loans for the 18-month period between October 2001 and January 2003. The `concession' works out to around five percentage points at the current rates.

The banks would, however, need to be paid back the concession in the 2-3 years following January 2003.

Also, the bankers would release fund-based and non-fund-based limits for SPIC, which had been frozen after the company defaulted on its repayments.

Addressing a press conference here, Mr Ashwin C. Muthiah, SPIC's Vice-Chairman, said the company had a fund-based limit of Rs 1,000 crore and a non-fund limit of Rs 448 crore (mainly for opening LCs and giving bank guarantees). The effect of this is essentially improved cash flows. The cash released from (temporarily) lower interest rates and access to bank funds would enable the company to get better terms from its suppliers. Also, SPIC would negotiate better, while selling off some of the non-agri input businesses, such as pharma.

"We have got a two-year oxygen period," was how Mr Muthiah described the deal with the bankers.

SPIC requires working capital financing to the tune of Rs 1,000 crore, which, according to Mr Muthiah, is about half of the company's total debt.

Of the Rs 1,000-crore fund-based limit, SPIC could draw up to Rs 250 crore towards its working capital requirements. The rest of the money is split between, what the bankers call, `demand loan' (Rs 550 crore) and `corporate loan'. The bankers have also agreed to let the company repay the principal amount of these loans after three years out of the proceeds of the proposed disinvestments.

SPIC proposes to sell its 60 per cent stake in the joint venture company, Indo-Jordan Chemicals. It had invested around $33 million (roughly Rs 165 crore now) in this venture. It expects to get Rs 375 crore for its stake.

Mr Babu Verghese, Managing Director, who assumed office earlier this week, admitted that there were Indian parties interested in picking up SPIC's stake. He also did not deny that one of them could be a company of the SPIC group.

It was mentioned at the press conference that SPIC's turnover in 2001-02 could be around Rs 1,700 crore. Officials also said SPIC defaulted on its principal repayments to the FRN bond holders recently, only upon the advice of the domestic bankers.

Asked if SPIC was not forsaking the gains from being with the joint venture (returns, access to a key raw material phosphoric acid), Mr Verghese said SPIC really had no option but to sell off its stake, needing money for its very survival. "First the mother has to be able to breathe, only then can we think of the baby," he said.

The other divestment that SPIC has been thinking of is the pharma division, which produces Penicillin-G. The company has been wanting to spin off this division and sell it off, or bring on board a strategic partner, for over two years. Asked what gave him the confidence that SPIC would be able to do that now, Mr Muthiah said the bankers had not yet given permission to spin-off the division.

TIDCO keen on selling TNPL stake: The Tamil Nadu Industrial Development Corporation (TIDCO) is keen on selling its stake in Tamil Nadu Petroproducts Ltd, a company jointly promoted by it with SPIC.

According to sources, TIDCO had informally approached SPIC to find out if it was interested in buying its stake. SPIC is in favour of this proposal, but is yet to take a decision on this issue.

The promoters, TIDCO and SPIC, together hold a 34.5 per cent stake in TPL. TIDCO originally had a 26 per cent stake, which subsequently got reduced after a public issue. It is stated that TIDCO's stake could be worth about Rs 100 crore.

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