Baroda Rayon spins out restructuring plan
Sabarinath M
Mumbai, Jan 20: A radical restructuring plan, drawn up for the Rs 353 crore Gaekwad-owned Baroda Rayon in association with management consultant Arthur Andersen, is being structured into a three-pronged strategy to double capacity at the nylon tyre cord plant, diversify into new ventures and commence production at the polyester filament yarn unit.The company is all set to receive a Rs 13 crore boost through a sale, almost through, of the company's 17th floor premises at Hoechst Building in Mumbai. The most likely buyer is Infrastructure Leasing & Financial Services (IL&FS), which has already purchased Baroda Rayon's 16th floor premises in the same building. Sale of assets is also part of the overall turnaround strategy for the company. The crucial restructuring plan will involve doubling capacity at the nylon tyre cord plant and sale of the viscose filament yarn plant for a sum not less than Rs 100 crore. The existing capacity of the nylon tyre cord plant is 6,000 tonnes per annum. New business -- most
probably electronics or chemicals -- are also being looked upon as a turnaround route. The diversifications are expected to take the company further along the already charted course, away from hitherto core activity, textiles. Also on the anvil is restarting operations at the polyester filament yarn plant (PFY) at Surat, which has been lying underutilised for quite some time. The PFY unit will be spun off into a separate company with a joint venture partner, once the company pays off its institutional liabilities through the sale of assets. "We have reached an advanced stage of negotiations with IL&FS and a decision will be taken shortly. Operations at the PFY unit will be resumed next week. We are exploring possibilities for the sale of the VFY plant and are in talks with Indian rayon, but nothing has been finalised so far. We will sell the plant if we get the desired price and hope to settle the outstandings in a couple of months," Baroda Rayon chairman & managing director SP Gaekwad told The Financial
Express. He did not divulge details about the arrangements made for the resumption of operations at the PFY plant. The company is not planning to make any substantial changes in the organisational setup except for recruitment of professionals in the finance and marketing departments. Gaekwad quelled speculations that Baroda Rayon may appoint a chief executive officer. "Our team is highly qualified and was instrumental in the growth of the company. A change at the top level, when things are going bad due to depressed market conditions, is uncalled for," Gaekwad said. "We may appoint a few finance and marketing professionals to fill up the vacancies arising out of retirement," he added. Baroda Rayon, which was making profits, plunged into trouble when its expansion plans at the PFY unit got stuck three years back due to a host of factors. Baroda Rayon, which was making profits, plunged into trouble when its expansion plans at the PFY unit got stuck three years back due to a host of factors. It had
borrowed foreign exchange loans amounting to Rs 20 crore from ICICI and Rs 15-crore bridge loans from IL&FS for carrying out the expansion plan. The company repaid the bridge loans by selling off its 16th floor premises at Hoechst House in Mumbai. The total institutional liabilities of the company, including interest, comes to around Rs 60 crore. ICICI has a Rs 30 crore exposure. Efforts to rope in the Korean conglomerate, Samsung Corporation, as a partner for the PFY unit hit a roadblock following the financial crisis in Korea. The company reported a net loss of Rs 18.58 crore in the first half of 1997-98.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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