NEW DELHI, Jan 29: The Industrial Finance Corporation of India (IFCI) has refused to stand guarantor to JCT Ltd's proposed $47-million external commercial borrowing (ECB) issue unless the company submits a specific proposal for repayment of its outstandings with the financial institutions.The MM Thapar-promoted JCT's total outstanding with the FIs and the banks is estimated to be over Rs 220 crore. Further, the company also has outstandings with sundry debtors.
The ECB programme was part of its major revamp of residual businesses such as the cotton textile and the steel divisions. JCT plans to replace Rs 130 crore of its long-term rupee debt in these arms through its proposed ECB.
JCT had recently made a presentation before IFCI requesting it to stand guarantor for the ECB. Institutional sources told The Financial Express that IFCI has set the loan repayment schedule as a precondition for standing guarantor.
Sources further said that JCT has yet to show "anything in concrete" to the FIs regardingthe sale of its synthetics division to Polysindo, which is expected to fetch Rs 414 crore. Company sources confirmed that IFCI has demanded "certain clarifications" regarding how the company will be dealing with its NPA situation, and added that the company is working on a proposal to clear its dues with the FIs and the banks.
Sources further said that JCT's deal with Polysindo has been finalised. As the deal stands, Polysindo will be initially issuing shares worth Rs 36 crore to JCT. This amount will be subsequently repaid by Polysindo when they pick up 100 per cent stake in the division, sources added.
Significantly, Polysindo has already received the Foreign Investment Promotion Board (FIPB) clearance for picking up 100 per cent stake in the synthetics division of JCT. JCT was expecting to repay loans worth Rs 413 crore from the sale proceeds of its synthetics division, which will leave it with a residual debt of Rs 300 crore. Of this, JCT plans to bring in Rs 100 crore as working capital in itscotton textiles division, while replacing part of the rest through its proposed ECB. This, the company felts, would substantially lower its interest burden.
Despite reporting a loss of Rs 68 crore in the first half of the current financial year, JCT is optimistic about a turnaround especially with the hiving off the synthetics division. The synthetics division alone accounted for Rs 49 crore loss.
The company's new focus would be value-added textiles. Further, it is also expecting an improvement in its export performance. JCT has claimed that its export earning in 1997-98 is likely to touch the Rs 170 crore-mark.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
