CHENNAI, May 22: Spartek has firmed up with Schoeflein Investment Co and its associate companies in New York to bring in funds to overcome its liquidity problems. This is to be done through its offshore subsidiary floated by its parent company, Sparta Holdings, in Mauritius. This is the first stage of the restructuring plan prepared by the company `to regain its lost glory'.

Schoeflein is expected to invest $19 million in the Spartek Group. Of this $6 million is to be invested in Spartek Ceramics, $7 million in Neycer India and $6 million in Stiles India.

The investment is to come in the form of interest bearing fully convertible debentures (FCD) which will be converted into equity shares after seven years.

Spartek is still awaiting the Foreign Investment Promotion Board (FIPB) approval for bringing the funds into the country. The approval which was earlier expected by January 1997 is now likely by the end of this month.

Speaking to The Financial Express, executive vice-president of the company, Mukesh Mathur said, they are also hoping to draw some funds from Indocean Ventures in Mumbai which has already invested around $ 2 million in the company.

Of the funds that will come in from Schoeflein, Spartek proposes to utilise $1.5 million to make Stiles India a debt free company. It also proposes to expand the Stiles plant capacity from its present 4000 square metres per day to 10,000 sq m. It also proposes to invest in modernising the tiles division of Spartek.

In order to emerge from the debt trap, it proposes to go in for a one-time settlement of dues pertaining to Neycer.

Around $5.5 million has been earmarked for the purpose.

Spartek, despite the natural advantage afforded by the generic use of its brand-name, lost out its near monopoly status due to certain `mistakes'. In a bid to increase its capacity and also diversify, the company took over two companies approaching sickness (Neycer and Stiles). The strategy backfired. The working capital and the related cash flow problems resulted in the units performing poorly, thereby becoming a drain on Spartek's profitability. The company had to withdraw its products from select markets such as north India.

As if the company had not already bitten off more than it could chew, it set up a ceramic granite unit as a 100 per cent EOU. The project depended on a single foreign buyer and when he reneged on his commitment, the project came a cropper.

In a bid to grab back its share in ceramic tiles, Spartek announced a restructuring plan last year which included infusion of foreign funds, recruitment of a fresh set of key managerial personnel, grouping all tile units under Spartek and hiving off Neycer's sanitary division into a separate company.

The debonding of the ceramic granite division was also proposed.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.