Calcutta, June 7: VST Industries has estimated a liability of Rs 9.20 crore on account of non-fulfilment of export obligation under the export promotion capital goods (EPCG) scheme. The amount includes customs duty saved and interest on duty saved.

However, the amount of liquidated damages payable, the penalty, that is, has to be decided by the government and is not known now.

The company had imported equipment worth Rs 8.05 crore (CIF value) through the EPCG scheme at concessional rates of duties, because of which it has an export obligation of Rs 31.75 crore by 2000. The company is not in a position to fulfil its export obligations to the extent of Rs 30.78 crore.

The company has clarified in its draft offer document for the pending rights issue of FCDs that it "could not achieve its export commitment because of the developments in CIS countries, its target market. As a result, the company will have to pay Rs 9.20 crore by way of duty together with interest as on May 31, 1997.

"The company's forthcoming rights issue of 55.59 lakh zero coupon fully convertible debentures of Rs 135 each in the ratio of 36 debentures for every 100 shares held is intended to raise Rs 75.05 crore. The company has not made any arrangements for standby underwriting, which means that any shortfall in the public category would probably be made good by the promoters, BAT Plc of the UK, which holds 31.73 per cent of the paid-up capital of the company.

Bulk of the funds raised -- Rs 50 crore -- will be used to fund the 100 per cent export-oriented unit for vegetable processing and oleoresins of VST Natural Products Ltd, a 100 per cent subsidiary of the company. Normal capital expenditure (maintenance and upgradation costs for its cigarette operations) and working capital will account for Rs 6 crore and Rs 19.05 crore respectively.

The incremental working capital requirement of the company has been estimated at Rs 15.2 crore for the next three years while the balance of Rs 4.85 crore will be used to reduce working capital borrowings.

It currently enjoys a working capital limit of Rs 49.42 crore from its consortium of banks. The company has an installed capacity of 33,007 million cigarette sticks per annum and the overall growth in cigarette volumes in 1996-97 was a negative 10.6 per cent over 1995-96. In 1997-98 the company has forecast a volume growth of 14.9 per cent to 15,398 million sticks largely by "maintaining the prices in the wake of competition and thereby capturing a portion of competitor's market."

The company has projected sales and net profit of Rs 701.14 crore and Rs 80 crore for the year to March 31, 1998. In 1996-97, sales and net profit achieved were Rs 567.79 crore and Rs 2.54 crore, according to unaudited results. The actual profit after tax was Rs 7.56 crore, but the company had to make adjustments in line with disclosure rules (clarification XIV) laid down by the Securities & Exchange Board of India.

According to the draft offer document, the conversion will be done after 12 months from the date of allotment at a 20 per cent discount to the average of the daily closing price of the shares at the Mumbai stock exchange 3 months prior to such conversion, subject to a maximum of Rs 135 and a minimum of Rs 80.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.