"We will review the situation in January with IFC and chart out the next course of action", he said adding "once the demand for cement picks up, we will be able to repay the amount immediately".

DLF has so far paid two installments of Rs 24 crore to IFC besides paying Rs 16-odd crore as interest on the $28 million loan, which it availed to part finance its 1.4 million tpa cement plant in Rajasthan. The plant, which was set up in technical collaboration with Nihon of Japan commenced commercial production late last year.

The company recorded anet loss of Rs 52 crore on a turnover of over Rs 265 crore for the financial year ended March, 1998.

Minocha said the company has initiated cost-cutting measures to step up the profitability. While the production capacity has been increased by over 20 per cent on one hand, operating parameters including coal and power consumption have been reduced, he added. "The plant which had an average 90 per cent capacity utilisation during the current financial year, increased the capacity utilisation to 125 per cent in October", Minocha said.

DLF Cement hopes to end the current fiscal with a total turnover of over Rs 280 crore.

Besides the IFC loan, the company has also managed to get the ICICI-led consortium to restructure the company's Rs 110-crore outstanding loans. The company owes Rs 70 crore to ICICI along with Rs 20 crore each to Industrial Development Bank of India (IDBI) and Industrial Finance Corporation of India (IFCI).

The domestic loan repayment schedule has been extended by five years. Thematurity period of the loans, however, will remain at six years.

The company will now have to start the repayment of IDBI loans in 2003 instead of the earlier schedule of 1999. The entire amount will have to be repaid by 2009. The financial institutions have agreed to a tail-ended rate of interest, starting from 10 per cent in the first couple of years and gradually going up to 22 per cent. The yield to maturity (average rate of interest) will be 19.5 per cent. DLF Cement recorded a net loss of Rs 34 crore for the first six months of the current fiscal on a turnover of Rs 127 crore. The company's net loss was Rs 28 crore on a turnover of Rs 109 crore during the same period in the previous year.

INSIGHT

The financial position of DLF Cements is such that debt restructuring is perhaps the only option. First, the plant which started commercial production one and half years ago is located at Rajasthan which has got supply far in excess of demand. In fact, that is the situation in all of north India.Higher interest and depreciation cost and low realisations have resulted in poor cash flow. The crux of the matter, however, is the revival in demand. Even debt restructuring will be of little help in the absence of demand.