Reliance to settle major part of Nocil debt

Reliance will cough up 80% of the dues, while Nocil will pay the rest.

After taking over the petrochemicals and plastics division of the ailing National Organic Chemicals Industries Ltd (Nocil), Reliance Industries is set to settle a major part of Nocil's dues of over Rs 305 crore.

Both companies had submitted a proposal for a one-time settlement with Nocil's lenders, a consortium of 15 banks, to pay back about Rs 286 crore by October, said an institutional source. While Reliance will cough up 80 per cent of the dues, Nocil will pay the rest.

A Reliance Industries spokesperson, when contacted, declined to comment. The payment will be made in a mix of cash, shares and zero-coupon debentures.

Lenders have been given three options for the settlement. In the first, the dues will be settled by paying cash up front, equity shares and zero-coupon debentures in the proportion of one-third of total dues each.

The second option envisages the settlement of one-third of dues in cash and two-third in shares. The third suggests an up front payment of 45 per cent.

While foreign banks have chosen the third option, many of the Indian banks have opted for the second choice.

About 80 per cent of the shares, proposed to be given to the lenders under the settlement scheme, will be of Relene Petrochemicals, a closely held Reliance group company.

These shares will be listed on the Bombay Stock Exchange in three years. The remaining 20 per cent of the shares will be of Nocil which is already listed, said a source.

The major lenders to the ailing unit include State Bank of India (Rs 73 crore), Union Bank of India (Rs 49 crore), ICICI Bank (Rs 21 crore), Central Bank of India (Rs 19 crore), Bank of India (Rs 17 crore), ABN Amro (Rs 17 crore), Industrial Investment Bank of India (Rs 17.6 crore), Bank of Baroda (Rs 15 crore) and Corporation Bank (Rs 16 crore).

Meanwhile, the Nocil demerger is awaiting the Mumbai High Court's approval. Sunbright Cement Agencies, a business associate of Reliance Industries, will take over Nocil Petrochemicals, which now consists of the petrochemicals and plastics division. The rubber chemicals division will remain with Nocil.

The Arvind Mafatlal group-promoted Nocil has been mired in a financial and labour crisis for the past few years. The company had shut in April 2002 after a number of restructuring proposals failed to take off and the account became a non-performing asset (NPA) in the books of several lenders.