Duncans eyes Rs 240 cr from non-core assets

The Gouri Prasad Goenka group is looking at garnering Rs 240 crore from sale of unremunerative assets, including real estate and plantations, in Duncans Industries to make the company viable.

Goenka said the projection for sale of assets as per the corporate debt restructuring (CDR) package is Rs 240 crore. The proceeds would be utilised to make the company viable.

Some unremunerative assets were in Bengal, while some were outside. Duncans had plantations in north Bengal.

He, however, clarified that the ultimate proceeds from the sale of assets could be a little less or more than Rs 240 crore and this was the projection made by the company in the CDR. The assets would be sold over three years.

The CDR package proposed revival of the fertiliser plant at Panki, reduction in the rate of interest, funding of interest, rescheduling repayment of loans, waiver of liquidated damages and infusion of additional funds by promoters.

The total debt exposure to the company was Rs 600 crore and included Rs 90 crore of fixed deposits. However, the viability of the company heavily depends on the fertiliser plant at Panki, Kanpur, which contributed 80 per cent towards Duncans' revenues.

The fertiliser unit was closed since 2002. The company decided to down the shutters of the plant when the government demanded Rs 365 crore from the company following a downward revision of retention price. A case against the government is still pending at the Allahabad High Court.

Goenka said the company required Rs 87 crore to get the fertiliser unit working and this included working capital. Of this, promoters would bring to the table Rs 62 crore.

Goenka expected the fertiliser unit to restart operations some time in the second half of March. As far as the plantations business was concerned, Goenka explained, while the fertiliser business was expected to move in a northward direction, the same could not said about the plantations business, which was cyclical in nature.

Moreover, the social cost associated with the plantations was a burden on the bottomline of plantation companies.

Duncans was not the only company, which was suffering owing to the overhead costs of a plantations business. Tata Tea recently adopted a new model to insulate the company from the fixed costs in plantations and restructured its plantations strategy in the south of India.