The Hindu Business Line : Sical sets up subsidiary to handle TNEB contract

SOUTH India Corporation (Agencies) Ltd has set up a subsidiary, SICAL Logistics Ltd, for exclusively handling a coal-handling contract from the Tamil Nadu Electricity Board (TNEB).

In February 2002, SICAL, part of the M.A. Chidambaram group, bagged a 20-year contract for handling coal brought into the Ennore port for TNEB. The company had to spend Rs 104 crore for equipment and machinery needed for the project. About Rs 24 crore came from internal accruals, Rs 17 crore as capital and Rs 63 crore as loans. These loans carried an average interest rate of 15.5 per cent.

Later, the company wanted the interest rates to be brought down in alignment with the current market rates, but the lenders, IDBI, LIC and Canara Bank, were not willing. So, SICAL started to look for other lenders for making a debt swap.

According to the company's annual report for 2003-04, the new lenders "are expecting a ring-fenced arrangement of charging the assets of the project in their favour, besides insulating the project cash flows by routing the same through a separate legal entity".

The legal entity is SICAL Logistics Ltd. The capital of Rs 17 crore brought in for the sake of the project is sought to be transferred to the new company.

SICAL is seeking shareholders' approval for the arrangement. If the resolutions were passed in the AGM on September 27, the TNEB project will be thenceforth handled by SICAL Logistics Ltd.

Interest burden has been eating into the profits of the company. Last year, interest charge was Rs 63.59 crore, which was in fact lower by Rs 5 crore than in the previous year. The company reported a net profit of Rs 9.95 crore in 2003-04, on a turnover of Rs 1,085 crore.

In the first quarter of the current year, SICAL reported a net loss of Rs 3.70 crore, because of Rs 7-crore loss on account of a sale of a refractory unit in Gujarat. Profit before the extraordinary item amounted to Rs 5.09 crore, compared with Rs 1.14 crore in the first quarter of last year.

The refractory division achieved a turnover of Rs 17.86 crore and earned an operating profit of Rs 3.37 crore.

The annual report mentions that the company bagged a contract for operation and maintenance of 15 offshore vessels of ONGC in August 2003.

It is expected that the annual billing will come to about Rs 25 crore. Also, the company secured another O&M contract from Central Warehousing Corporation for running CWC's three inland container depots.

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