The Hindu Business Line : Lakshmi Synthetic looking down the barrel

THE synthetic machinery-manufacturing unit - Lakshmi Synthetic Machinery Manufacturers Ltd (LSM) - - belonging to the Lakshmi Mills group, is in dire straits, unable to find a resourceful party or company in the same field for taking over the unit.

The 13-year-old unit is classified as a sick industrial company within the meaning of Clause (o) of section 3(1) of the Sick Industrial Companies (Special provisions) Act, 1985.

In May 2001, the operating agency, IDBI, had submitted a report to the BIFR about receiving enquiries from some parties about the company. IDBI was directed to hold a joint meeting of all involved, including banks and financial institutions, to arrive at a broad minimum fallback position.

Thereafter, the BIFR directed the operating agency to issue advertisements in accordance with the laid down procedure. The BIFR further made it clear that if these efforts fetched no response, the Bench could proceed to issue a show cause notice for winding up of the company without any further hearing.

Almost a year later, in April 2002, banks and financial institutions met to discuss the issue. A majority of the banks and institutions had indicated at that meeting their preference for a one-time settlement.

In view of the company's inability to offer any one-time settlement, the involved groups decided that they could explore the possibility of locating a resourceful party or companies in the same field for taking over the unit, within a period of one month.

However, no tie-up or deal could be clinched until date (three months after the decision was taken). Under these circumstances, the LSM board is slated to meet on July 15 for its 13th annual general meeting.

The turnover in the 2001-02 fiscal has almost halved to Rs 2.64 crore, as against Rs 5.29 crore during the corresponding period of the previous year. The net loss from operations rose to Rs.4.78 crore (Rs 3.95 crore).

The directors concede that the company is unable to show any improvement as it is not in a position to develop cheaper versions of the texturising machines, due to paucity of funds.

The fund-starved company is unable to compete, with the buyers clearly indicating their preference for cheaper machines.

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