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C.R. Sukumar

HYDERABAD, Dec. 3

PAVING the way for an early revival of Pennar Industries Ltd (PIL), the ailing cold rolled steel strips manufacturer that suffered complete erosion of net worth, the lenders and members of the corporate debt restructuring (CDR) Forum led by the Industrial Development Bank of India (IDBI) have cleared a major debt revamp scheme.

According to industry sources, the banks and financial institutions of the CDR forum approved in principle restructuring the company's debt by bringing down the average rate of interest on loans to 12 per cent from the existing level of 18 per cent with a moratorium of two years on the loan repayment.

The cut in interest rate on a debt of little over Rs 200 crore is expected to result in a saving of around Rs 10 crore per annum on the interest front alone.

In fact, for the year ended June 30, 2002, the company incurred an interest burden of Rs 20.73 crore as against Rs 32.69 crore in the previous accounting period.

The major benefit in interest reduction coupled with other benefits of the CDR scheme was expected to enable the company turn its net worth completely positive over five years, which includes the moratorium period of two years.

Confirming this, the PIL Executive Chairman, Mr J. Nrupender Rao, told Business Line that the key features of the CDR scheme include deferring term loans, converting part of working capital loans into term loans with a two-year moratorium for repayment up to October 1, 2004, converting interest into term loans and reducing interest payable on term and working capital loans.

Apart from the decision to advise the company go in for capital reduction to the extent of 50 per cent from the current level of Rs 21.7 crore, the banks and FIs have also decided to direct the Pennar promoters to pump in fresh capital to the tune of Rs 10 crore either on their own on in alliance with partners.

"Pending receipt of formal approval letter from the CDR Forum on the debt restructuring and approvals to be obtained from the shareholders for capital reduction and infusion of fresh capital, we are currently negotiating with a couple of European investors, who have shown interest in acquiring a significant stake in the company," Mr Nrupender Rao said.

As on June 30, 2002, the accumulated losses stood at Rs 38.73 crore as against the paid-up equity capital of Rs 21.7 crore. While the secured loans amounted to Rs 210.15 crore, the unsecured loans stood at Rs 13.85 crore.

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