Mumbai, Jan 28: IDBI has decided to take a tough stand against the Kapal Mehra-controlled Orkay Mills, with the cash-strapped JVG group stalling its much-hyped takeover of Orkay's partially-oriented yarn plant (POY) at Patalganga in Maharashtra. It is considering issuing a notice to recall outstanding loans.As a first step, the institution, in its capacity as the major lender, is planning to recall loans worth Rs 40 crore from Orkay soon. A proposal to this effect has been discussed between heads of various lending institutions held in Mumbai on Tuesday. Orkay's total liabilities to the institutions come to around Rs 100 crore.
According to sources, IDBI is likely to issue a recall notice to Orkay Mills in February. If it is not willing to repay loans within the specified deadline, IDBI will initiate legal proceedings against the company, sources added.
The consensus on recalling loans follows the realisation that the JVG group, which had earlier proposed to buy the POY unit of Orkay for Rs 205 crore,is not in a position to honour the commitment. IDBI had written a series of letters to JVG in the last few months to take on responsibilities for Orkay's institutional liabilities.
The JVG group has, however, been showing no interest in arranging the funds for the takeover citing certain changes in the terms of the deal. Under the deal Orkay had signed with JVG for the sale of the POY plant, the Rs 205 crore consideration was to be paid over a five-year period. But JVG has not paid any money whatsoever.
The group has apparently abandoned the takeover following the sudden adverse turn of events. Faced with a severe liquidity crunch, the group is all set to merge associate companies into its flagship, JVG Departmental Stores, according to industry observers. The flagship company has been facing loan repayment problems of its own, and plans to roll over payments to creditors. The JVG Departmental Stores board is in the process of devising a strategy to tide over the financial crisis.
The JVG groupcomprises JVG Finance & Leasing, JVG Securities, JVG Departmental Stores, JVG Housing Finance and JVG Overseas.
The group was in the news last year when Sebi barred JVG Finance from accepting deposits in a crackdown on suspect NBFCs following the CRB scam. After this ban, there was a run on the company with depositors claiming their money back. Some of these claims are still to be addressed since the group is cash-strapped.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
