Debt-laden firms opt for capital rejig

17 firms propose to reduce equity

Corporate India is on a debt restructuring spree. As many as 17 debt-ridden firms have proposed a reduction in their equity capital in the current fiscal.

As per the corporate debt restructuring (CDR) cell, the reduction of equity capital is required to clean up the balance-sheet by paring carried forward losses.

Centurion Bank, Marmo Goa Steel and Polychem have already restructured their capital by reducing the face value of their shares.

Nine others have proposed to restructure their capital either by reducing the face value of shares or cancelling a certain percentage of equity capital and allotting redeemable cumulative preference shares in lieu of cancelled shares.

Centurion Bank reduced the face value of its share from Rs 10 to Re1 each by cancelling Rs 9 from the existing face value. Owing to the reduction in capital, the issued, subscribed and paid-up equity capital of the bank reduced from Rs 152.47 crore to Rs 15.25 crore. As a result, the net loss of bank shrunk from Rs 155.66 crore to Rs 8.44 crore.

The board of Mukand at its meeting held on August 11, 2003 decided to reduce the current subscribed and paid-up equity share capital of Rs 28.13, comprising equity shares of Rs 10, by 20 per cent.

In lieu of the cancelled shares, the company proposed to issue Rs 5.63 crore redeemable cumulative preference shares of Rs 10 each with coupon rate of 0.01 per cent to shareholder.

Essar Steel at its annual general meeting held on July 19 had proposed to reduce its equity capital by 40 per cent and issue 0.01 per cent cumulative redeemable preference shares instead.

Polychem has reduced its share capital to Rs 0.40 crore from Rs 16.16 crore. After the adjustment of equity capital, the company's carried forward losses were reduced from Rs 43.22 crore to Rs 17.06 crore.

Century Extrusion reduced its share capital from Rs12 crore to Rs1.20 crore by converting 1.20 crore equity shares of Rs 10 each to Re 1 each, fully paid-up.

The company wrote off its reserves and surplus of Rs 181.96 lakh against a debit balance of Rs 181.96 lakh in the profit and loss account.

Restile Ceramic has reduced its paid-up capital from Rs 9.44 crore to Rs 1.90 crore pursuant to a BIFR order.

Marmagoa Steel has reduced its share capital by 90 per cent to Rs 1.30 crore from Rs 12.99 crore. Zenith has reduced its equity capital by Rs 20.10 crore to Rs 13.84 crore and its securities premium account by Rs 12.61 crore.

Sree Rayalseema Alkalies has approved the draft scheme of arrangement for reduction of 50 per cent paid-up equity capital and conversion of such reduction into cumulative redeemable preference shares of Rs 10 each.

Fairfield Atlas plans to reduce its paid-up share capital and utilise the amount written down to wipe out the accumulated losses to that extent.

Volex Finance & Industries has approved the reduction of paid-up value of shares from Rs 10 to Rs 4 each to wipe out the huge losses.