Narmada Cement, now a subsidiary of L&T, has run up accumulated losses of Rs 39.55 crore, which has eroded over 50 per cent of its net worth. "The board of directors will be reporting the fact of the erosion in net worth to the BIFR and are also placing the matter for the consideration of the shareholders at the ensuing annual general meeting," Narmada Cement has said in its notice to shareholders.

Such a declaration is mandatory under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985.

The referral of Narmada Cements to BIFR comes shortly after Shree Digvijay Cement, which was acquired by Aditya Birla group flagship Grasim Industries for Rs 280 crore, turned sick with accumulated losses wiping out its entire net worth.

As a remedial measure, Narmada Cement, which has a capcity of 1.5 million tonnes, has proposed the calling up of the uncalled share capital on 41.4 lakh equity shares (face value Rs 10) which have been paid up to the extent of Rs 2.50 per share.

Shareholders' approval will also be sought for conversion of 17.5 lakh fully convertible debentures (face value Rs 100) into fully paid equity shares at par. Besides, any other measure considered appropriate to improve the current situation may also be taken up at the shareholders' meeting.

Narmada Cement, which had been promoted by the Chowgule group, was taken over by L&T, the largest cement producer with a capacity of over 15 million tonnes, in April last year. Following the buyout of the promoters' stake and three public offers, L&T's stake in the cement company has increased to 95.54 per cent.

Despite the change in management, the fortunes of Narmada Cement showed no signs of improvement with the company reporting a loss of Rs 22.77 crore during 1999-2000. The balance losses carried forward from the previous fiscal aggregated to Rs 16.78 crore.

The company, with grinding units at Magdala and Ratnagiri and clinkerisation unit at Jaffrabad, has a capacity to produce 1.5 million tonnes of cement per annum.

Narmada Cement has blamed the demand-supply mismatch for its lacklustre performance in recent years. "The Indian cement industry has been passing through a very difficult period due to mismatch in demand and supply situation, resulting in very low market price realisation. This is particularly applicable to Gujarat based cement units where the capacity is almost twice that of the consumption.

Further, the export prices of cement as well as clinker have been extremely unattractive due to competition from South-East Asian countries. Because of these reasons, the company has been incurring losses. In order to finance the deficit, the company had to resort to additional borrowing and incur additional interest cost," Narmada Cement has said.