Financial institutions have sought the ouster of S Madhava, managing director of Bellary Steels & Alloys, to make way for a "professional". The removal of Madhava has been set as a pre-condition to restructure loans of the company, and have also decided against granting additional* assistance if the stipulations were not met.
The parties to this agreement include IDBI, ICICI, IFCI, IIBI and Exim Bank. Highly-placed sources in the financial institutions (FIs) told Business Standard: "This decision was taken at a meeting of an inter-institutional forum. We are keen on a professional being appointed as chairman." Institutions also want to broad base the board by inducting more professionals.
Madhava confirmed in a faxed response to a Business Standard questionnaire that the company has approached the financial institutions for additional funds and conversion of existing debt into equity. He also said the company has no objection to a professional being inducted as chairman.
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On the specific issue of his stepping down, Madhava refused to comment. "We are yet to receive the sanction letter with terms and conditions stipulated by the institutions and therefore will not be able to comment on the points raised by you at the present juncture," Madhava said in his response.
Earlier, institutions had stipulated similar conditions for steel companies such as Rajinder Steel, and are in the process of tightening the noose around "several other" companies.
Institutions are at present considering a revised package to Bellary Steels which include about Rs 113 crore as rupee debt and subscribing to optionally fully convertible debentures of Rs 50 crore. The bailout package which is currently being discussed also includes guarantees to the tune of about Rs 30 crore.
Bellary Steels & Alloys posted a loss of Rs 17.20 crore on a total income of Rs 263.84 crore in 1999-2000. The problems being faced by Bellary Steels & Alloys is in keeping with the global recession in the steel sector. Steel majors the world over have estimated the demand for steel and invested in huge capacities.
This was especially true of India in the early nineties. In the first flush of liberalisation many companies, including leading corporates such as Essar and Ispat, invested in huge capacities only to find that the projected demand had not materialised.