Financial institutions plan to fix deadline for selling stake to Modis
Saibal Roy Choudhury and Veeshal Bakshi
NEW DELHI, January 22: Financial institutions have decided to fix a deadline for BK and VK Modi for the sale of their 45 per cent equity stake in Modi Rubber Ltd to the two brothers.FI sources said that a time-frame would be fixed at the heads of institutions' meeting scheduled to be held next week in Mumbai within which time the Modis would be told to come up with a concrete offer for purchase of the institutional holding. "The issue has to be settled soon as it has been delayed too long. If the Modis are unable to buy out our stake within that time-frame, we will look at the option of auctioning the shares," a source said. The FIs are likely to press for repayment of loans by Modi Rubber before sale of their stake to the two Modi brothers. MRL announced losses of Rs 18.55 crore for accounting year ending September, 1997, on a turnover of over Rs 1100 crore. The FIs, which jointly hold about 45 per cent of MRL's equity, have been demanding that the promoters - VK Modi and BK Modi - should commit
themselves to an agreement or face an auction of FI holding. The two Modi brothers have not agreed to the repayment of loans while buying the FI holding. The financial institutions are of the opinion that if this formula is not acceptable, then they will publicly auction their stake to salvage something out of a loss-making company which is operating in a highly competitive industry. The FIs feel that the competition for the company will only intensify with the entry of a number of multinational tyre companies. Among the FIs, Life Insurance Corporation and Unit Trust of India are the largest shareholders in MRL. The Industrial Finance Corporation of India and the Industrial Credit and Investment Corporation of India have relatively smaller holdings in the company. Though FIs have held meetings with the Modis recently, the issue has remained deadlocked due to differences between the two sides on loan repayments. The FIs do not want to have any exposure in the company after disinvestment of their
holding. On the other hand, the Modis have argued, in a representation to the finance ministry, that the sale of stake and loans should not be clubbed together. The recession in the tyre industry has hit the company badly as imports have been liberalised. The poor profitability of the company has compelled it to postpone the company's restructuring.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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