Mumbai, July 15: The KK Birla-controlled Chambal Fertilisers & Chemicals' plan to privately place Rs 40-crore non-convertible debentures (NCDs) with financial institutions (FIs) may fall through. This follows the reappraisal of the expansion project at its Kota unit by institutions. Unit Trust of India (UTI), which had initially taken an `in-principle' decision to sanction Rs 20 crore towards the Rs 40-crore issue, has decided to withdraw since it feels the company's debt-equity ratio is very high.

The planned private placement of debentures could part-finance the Rs 1,256-crore expansion plan, which is scheduled to be completed by 1999-end. Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) were to put in Rs 10 crore each.

The planned NCDs are to mature in the four, five and six years. It is understood that the institutions have been haggling for a 18.5 per cent coupon rate. This reflects the risk perception of the company as perceived by the FIs.

The company, on the other hand, feels the rate is substantially higher than those contracted by other corporates in the recent past. Reliance and Larsen & Toubro, among several others in the recent past, privately placed their five-year debentures at 15.5 per cent.

Senior sources in Chambal Fertilisers said: "We have been told that UTI, LIC and GIC are considering accepting Rs 40 crore worth NCDs. We have received sanction letters from GIC and their subsidiaries for Rs 10 crore. The terms of the sanctions are under discussion".

Chambal Fertliser has denied that disbursements of the sanctioned amounts have been stalled since the debt-equity ratio is above 2.5. The company's debt-equity ratio was 1.2 for the financial year ended March 31, 1997, and 1.46 in the previous year, it said in a faxed reply.

Chambal Fertliser has also claimed that it has not arranged for an alternative financing route since the NCDs will be placed at a later date. The delay in the placement will not hamper capacity expansion, the company added in its reply. Chambal Fertilisers plans to double capacity by adding a 1,350-tonne per day ammonia plant and another 2,350-tonne per day urea unit.

The project will be designed to use naphtha and natural gas, in view of the likely shortage of natural gas.The project is being financed through rupee loans worth Rs 370 crore from institutions and banks, foreign currency loans totalling Rs 93 crore, deferred payment guarantees of Rs 429 crore as well as Rs 364 crore through internal accruals.

Chambal Fertilisers recorded a lower turnover in 1996-97 at Rs 746.46 crore as against Rs 751.52 crore in the previous year. Despite a lower interest payout (at Rs 132.3 crore against Rs 751.52 crore), the company recorded lower net profit at Rs 118.59 crore compared with Rs 139.06 crore in 1995-96. It provided for a minimum alternate tax of Rs 17.69 crore against zero-tax in the previous year.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.