MUMBAI, Dec 25: Financial institutions have decided to scout for new promoters to bail out the troubled Pal-Peugeot. The move is a bid to recover the money they had invested in the form of subscription to the company's partly-convertible debentures in January last year. The institutions, led by the Industrial Credit & Investment Corporation of India (ICICI), had invested Rs 125 crore in the auto venture.

With both the promoters --Premier Automobiles Ltd and Automobiles Peugeot --threatening to walk out of the project, the spectre of bulging sticky loans has cast its shadow on the balance sheets of six financial intermediaries. ICICI, the lead institution, has the maximum exposure of Rs 52 crore, followed by UTI (Rs 36 crore), IDBI (Rs 26 crore), IIBI (Rs 6.5 crore), I-Sec (Rs 1.6 crore) and ILFS (Rs 1.8 crore).

None of the insitutions has a term-loan exposure in Pal-Peugeot. The institutions were forced to pick up the debentures as 91 per cent of the Rs 137-crore issue devolved on them.

"The entire exposure is a secured one with asset cover being more than three. There will not be any dearth of takers for the Pal-Peugeot facility, which can be handed over to any party as a general-purpose facility," sources said.

According to industry sources, the institutions have chalked out a three-pronged strategy to recover the sticky assets. To start with, the lead institution, ICICI, has called a meeting of the original promoters, Automobiles Peugeot of France and Premier Automobiles, in January.

Simultaneously, the lenders are on the lookout for prospective promoters. They have also kept the option open for putting the assets on the block to recover their money.

"This is a peculiar case. Never in the history of corporates have we seen both the promoters of a joint venture of such a magnitude disowning the `baby'. We are prepared for any eventuality to recover the funds," one institutional source said.

Institutions have not formally heard from the promoters of the joint venture as yet. The French auto major has invested Rs 166 crore in the joint venture, while Premier's contribution is pegged at Rs 84 crore. "For the overseas partner, it is a question of reputation. We do not think it will walk out in a huff without settling the matter with the financial institutions," sources said.

Pal-Peugeot entered the capital market in December 1995 with a simultaneous and linked public issue of equity shares at par and 15 per cent secured redeemable partly convertible debentures of Rs 50 each. Besides being forced to subscribe to the partly convertible debentures (as they devolved on them), six institutions -- ICICI, IDBI, IFCI, UTI, LIC and the erstwhile SCICI -- also picked up 35 lakh equity shares on a firm-allotment basis.Each debenture, which carries a face value of Rs 50, has two parts: a convertible portion of Rs 10, with the rest forming the non-convertible portion. Part A of each debenture has automatically been converted into one equity share with a face value of Rs 10. Part B, which carries a fixed coupon of 15 per cent half-yearly, will be redeemed at par in instalments of Rs 14, Rs 14 and Rs 12 respectively each at the end of sixth, seventh and eighth years -- that is, in 2001, 2002 and 2003.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.