The company, which posted net losses for the second consecutive year, has failed to make much headway on its 1.5-million tonne cement project as financial institutions are not keen on extending loans to new cement plans. The project has been stalled despite the company's proposal to bring in a foreign partner Nesher Israel Cement Enterprises as co-promoter.

Financial institutions, it is learnt, expressed reservations about funding greenfield cement ventures as recent capacity additions have led to a supply-overhang which has pulled down prices to low levels forcing companies to run for cover.

"No decision has been taken as yet to shelve the Gulbarga project, although precious little has been done," sources close to the company said.

Asearlier announced, the company had proposed to fund the project through institutional debt of Rs 400 crore, while the balance Rs 200 crore would have come from internal accruals.

Prospecting of deposits, says the company, has been completed by the department of mines and geology. "The core samples are being analysed. Based on the results, the necessary mining plan would be prepared and an application submitted to the Karnataka government for grant of mining lease," the company said.

However, the company's fortunes have dipped considerably in recent times as the industry continues to reel under a severe recession, and realisations have fallen to very low levels. Mysore Cement posted a net loss of Rs 41.84 crore for the 15-month period ended June 30, 1998, against a net loss of Rs 13.78 crore in the previous fiscal.

The beleaguered company has, meanwhile, decided to rope in Nesher Israel Cement Enterprises, an Israel-based cement major, as co-promoters by offering them a 9.01 per cent stake. Mysore Cementwill also make a preferential allotment of equity to associates of the Israeli company, foreign institutional investors, overseas corporate bodies and mutual funds for a total aggregate value of Rs 20 crore (including premium) to fund its working capital requirements. The new offer will, however, not exceed 15 per cent of the to the company's equity.

As a result, the holding of the Indian promoters will reduce from the existing 36.58 per cent to 31.10 per cent, while financial institutions will also have a lower stake at 33.50 per cent, as compared with the current holding of 39.41 per cent. Mysore Cements will seek approval of shareholders at its annual general meeting (AGM) next month to effect changes in the equity structure.

Nesher of Israel has a cement capacity of about 10 million tonnes and is an active player in diverse sectors including roads and real estate.

INSIGHT
Lack of funds comes in the way

The company simply does not have funds for the project. The redemption of Rs 20crore worth preference shares had to be rolled over by increasing the dividend from 15.33 per cent to 17.75 per cent. Hence it is not too hard to guess at what price the company will be able to raise the debt.

Perhaps the more interesting point in the company's directors' report is that the cement industry has been granted a two-year exemption from the mandatory use of jute packaging. This will result in lower wastage and packaging costs for the industry.