At a meeting recently held between the consortia of financial institutions, banks, other lenders and the SPL officials, a top IDBI official insisted that SPL promoters should bring back these funds within a definite timeframe.

SPL director Ravi Sanghi, who was present in the meeting, however, denied the charges and said that Rs 90 crore out of the company's Rs 140 crore GDR issue (1994) was invested in group companies Sanghi Spinners India Ltd (SPIL) and Sanghi Industries Ltd (SIL).

Sanghi added that the institutions and banks had supported the projects of SPIL and SIL after being aware that the source of funds was SPL.

Sanghi also stated that the clarifications on the overvaluation of stocks and undervaluation of creditors as pointed out by some of FIs earlier, have been submitted to the lead bank, a copy of which would again besubmitted.

Significantly, the IDBI official also stated that the institutions would not be agreeable to consider reduction in interest below 16.5 per cent on the loans taken by the company, given the current interest rate regime.

He indicated that it would not be possible to do so as the books of the accounts of the institutions as on March 31 1998 had been closed and hence any reduction in the rates of interest could be considered only from April 1 this year.

The representative of some of the banks present in the meeting said that banks can only consider reliefs in case the institutions agree to do so.

The company had asked for a reduction of the interest rates applicable on loans to the company to two per cent over PLR with retrospective effect from April 1, 1997. This works out to be 15.5 per cent interest on the loans taken by SPL.

IDBI also suggested that the company should consider the sale of some of its group companies so as to utilise the sale proceeds for its revival. On this SPL felt thatit will be difficult to find buyers given the current depressed market conditions.

Interestingly, despite the doubts raised by the institutions the FIs decided to approve the loan rescheduling proposal of SPL. The total loans raised by the company from the FIs and banks is estimated to the tune of Rs 376 crore and the interest overdue is Rs 35 crore.

SPL's unaudited results shows that its turnover during the financial year 1997-98 has been Rs 291.52 crore.

The loans which were originally repayable from 1999-2000 would now be repaid from 2004-05. Further, the FIs also decided to convert the company's overdrawal on the working capital facility as on March 31, 1998, worth Rs 12.72 crore into a working capital term loan.

SPL promoters in return have agreed to bring in Rs 15 crore by March 1999 to reduce the burden of term loans. It was also decided in the meeting that the promoters may be asked to bring in more interest-free funds to improve the company's bottom-line at a later date.

SPL, which hasrecorded a Rs 33.64 crore loss during the last fiscal has projected that it will be having a net profit of Rs 15.17 crore in the current financial year. Further, SPL believes that on the basis of the interest-free funds to be brought in by the promoters and the reliefs granted by the banks it will improve its net profit steadily and would record Rs 64 crore in 2005-06.

The company also said that it will have Rs 111.48 crore as its gross profit on a combined turnover of Rs 327.37 crore in 1998-99 and subsequently maintain the same gross-profit level on a constant turnover of Rs 331.18 crore over the next seven fiscals.