Financial institutions, led by ICICI Ltd, have worked out a rehabilitation package for the loss-making Mysore Cements, promoted by S K Birla.
The consortium is lowering the interest rates and part of the loan is been converted into equity.
According to an institutional source, the company will convert the interest payable in five quarters, starting January 2001, into equity.
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As a part of the package, FIs is also lowering the interest rate on loans which has been pegged at around 16-17 per cent.
"The facility has been reworked following the ballooning concept. In the initial years the interest charged would be lower which would subsequently go up over the years. The average interest rate is around 11 per cent which would be staggered over 10 -12 years," sources added.
The company had taken term loans of Rs 180 crore as on March 2000, from ICICI, IDBI and IFCI. This is inclusive of interest of Rs 6.58 crore from these institutions. It had also taken working capital loans from banks and IFCI of Rs 87 crore.
The company had earlier allotted 9,30,000 equity shares of Rs10 each to ICICI in October 2000, towards payment of their dues. The FI had exercised its conversion option in lieu of a loan of Rs15 crore.
The SK Birla group has been working on a plan to divest its controlling stake in Mysore Cements and was earlier in talks with UK cement major Blue Circle Industries.
Nesher Israel has a 10 per cent stake in the company. Sources said divestment talks had fizzled out as most of the foreign companies are concentrating on the divestment of L&T's cement plants.
Mysore Cements has two cements units -- a 0.7-million tonne capacity unit at Amarasundara in Mysore and a 1.5-million tonne unit at Dhamoah in Madhya Pradesh. The company also runs a grinding unit at Jhansi in Uttar Pradesh.