This comes close on the heels of yet another group company, Torrent Gujarat Biotech Lt's recent failure to redeem the first instalment of its Rs 70-crore non-convertible debenture issue as also its default on interest payment.

Sources in the banking sector here revealed that GLFL, a non-banking finance company, had recently requested banks to waive off interest on the loans in view of its poor financial health. The banks have thus far sanctioned loans worth Rs 190 crore to GLFL, of which the maximum permissible bank finance stands at Rs 157 crore.

At a meeting held in Mumbai recently to discuss GLFL's request, the consortium of banks categorically refused to waive off theinterest on loans. Furthermore, the banks also shot down the rehabilitation package prepared by the Torrent group through its lead bank, Bank of India. As per the rehabilitation plan, the group had sought conversion of the Rs 157-crore loan into a two-part debenture. The first part would comprise Rs 85-crore debentures at 6 per cent rate, while the second part would comprise Rs 85-crore debenture at zero coupon rate. According to banking sources, the banks found the latter half of the proposition "totally untenable."

Market sources said GLFL has been going through a rough patch of late and due to bad market conditions, the performance of the NBFC had deteriorated significantly. During 1998-99, the company's operating losses stood at Rs 37.34 crore while its accumulated losses increased to Rs 56.17 crore. The net owned fund of the company plummetted from Rs 132 crore to an unhealthy Rs 47 crore. In the meantime, its liabilities rose to Rs 350 crore, of which the immediate liabilities which have to be repaidwithin six months stand at Rs 60 crore.

In view of this, credit-rating agency ICRA had recently downgraded GLFL's rating from MA to MB, which is below investment grade. It may be recalled that following this, GLFL had forged an agreement with the Hong Kong Shanghai Banking Corporation for the multinational bank's non fund-based activities. According to the agreement, HSBC would utilise GLFL's network of 26 branches in Gujarat and Maharashtra as a vehicle for its non fund-based activities. The move was not only expected to bring in some moolah for the cash-strapped GLFL for services utilised by HSBC but the tie-up was also expected to bolster investor confidence in the beleaguered NBFC.