If Balmer Lawrie-Van Leer fails to get full subscription even after extending the rights issue, the promoters will have to pick up the unsubscribed portion. According to the letter of offer, "The promoters -- Balmer Lawrie & Company and Royal Packaging Industries Van Leer BV will subscribe to the entire unsubscribed portion of the rights issue." This means the promoters' stake will go up substantially from the current 61.76 per cent.

However, the promoters will face a piquant situation. The objective of the rights issue is to implement a fund restructuring scheme which involves repaying the advances of Rs10 crore taken from the promoters. Now, if the promoters have to pump in money to see the rights issue through, it will be classic a case of converting their debt into equity.

On the other hand, if the issue is cancelled and the money refunded, the company's restructuring programme will be affected and it will not be in a position to correct its short-term asset liability mismatch. Balmer Lawrie-Van Leer currently faces a short-term working capital mismatch and its short-term liabilities exceed the current assets by Rs 4.02 crore.

Balmer Lawries-Van Lee manufactures and markets steel drum closure systems and plastic drums. The steel drum closure systems are sold under the brand name `Tri-Sure', which is a registered trademark of Royal Packaging Industries. The plastic drums are sold under the brand name `Valerex' which is also a registered trademark of Royal Packaging. The products are sold to the two promoters -- Balmer Lawrie & Company and Royal Packaging.

Balmer Lawrie-Van Leer has been in the redfor the past two years. For the year-ended 1996-97, the company incurred a loss of Rs 3.08 crore on turnover of Rs 34 crore primarily because of a high interest burden of over Rs 5 crore and poor sales realisation. For six-months sended September 1997, the net loss was around Rs 1.6 crore on a turnover of Rs 21.99 crore.