Under the plan finalised on Tuesday between the two partners, Henkel will infuse around Rs 28 crore which will go towards wiping out the mounting accumulated losses of the beleagured joint venture firm.

Henkel Spic India managing director A Satishkumar told The Financial Express: "We are a bit strapped for cash at the moment and require immediate funds infusion." It is believed that the company has accumulated losses of over Rs 30 crore.

Henkel will bring in the amount by subscribing to 28 lakh preference shares of Rs 100 each, which carry a coupon of 7 per cent. The company at present has a paid-up equity capital of Rs 73.83 crore.

The German multinational has a stake of around 46.7 per cent, while the AC Muthiah group has a 17 per cent holding in the company, as per the latest figuresavailable from the Bombay Stock Exchange.

Henkel Spic India is headed for further equity dilution as it plans to fund its much-delayed acquisition of Shaw Wallace's consumer products through a 1:1 rights issue.

The acquisition is expected to cost the company Rs 51.5 crore to buy out Shaw Wallace's stake, and another Rs 20 crore approximately for a 20 per cent open offer to minority shareholders.

Over the past few years, the company has been able to build up a substantial brand equity in the southern markets, but have not been able to make much headway in the western, eastern and northern markets.

A strong player in detergents, and also in homecare products through the recent acquisition of Modern Home Care Products, its popular brands include Zymo, Henko Stain Champion and White Giant Heavy Duty.

It has also lined up a countrywide launch of Pril dishwashing liquid, an international range from its parent's portfolio. The acquisition of Modern Home Care Products has also enabled the company torelaunch the Brisk range of homecare products.

Delay in the acquisition of Shaw Wallace's consumer products division (CPD) is also believed to be working against both the companies. While it is holding up Shaw Wallace's debt repayment plan, it is also delaying the expansion of Henkel Spic's products portfolio, as well as an established retail network in eastern India.

The joint venture company earlier had a marketing arrangement with Eveready Industries, the Williamson Magor group company, to market its detergents through the latter's retail network - believed to be one of the largest that any consumer products company has in the country.

The arrangement had to be terminated in early-1996 as it was then bidding for Shaw Wallace's CPD, and the deal was almost through.

The proposed acquisition will give Henkel Spic access to five brands that enjoy a high degree of brand equity in eastern India - Margo, Neem, Tuhina, Aramusk and Chek.

It is learnt to be in the final stages as the Company Law Board hasgiven its approval and the only clearnces that are now awaited is that of the courts.