The promoters of Float Glass India Ltd (FGI) - Asahi Corporation of Japan, ACC and Tata Engineering and Locomotive Company, have decided to inject fresh funds into the company.
Accordingly, the three promoters will subscribe to an issue of Rs 48 crore worth of preference shares of FGI.
The issue slated for next month will lead to an infusion of capital thereby boosting the companys net worth. Company officials said that FGI was a potentially sick company and hence would have to be referred compulsorily to the Board for Industrial and Financial Reconstruction (BIFR).
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They said that at the end of the financial year 1996-97, the net worth of the company was Rs 162 crore while accumulated losses amounted to Rs 140 crore, necessitating the infusion of capital.
The company which posted a net loss of Rs 87 crore in the last financial year will be referred to BIFR after discussing the reasons behind the losses at a extraordinary general meeting (EGM), due to be held on September 2. While Asahi holds a 49 per cent stake in the company, Telco and ACC hold 13 per cent each. The three companies will be subscribing to preferential shares which will carry an interest rate of 10 per cent. The shares will be redeemed not later than in the year 2007.
According to company officials, Asahi which has already advanced Rs 27.61 crore in the form of interest free loan for three years, is planning to advance additional interest free loan for a period of slightly less than three years to help FGI tide over the funds crunch.
While the company has not defaulted on interest payments, company officials pointed out that they might not be able to repay the principal amount. Consequently they have approached its bankers as well as the Industrial Development Bank of India (IDBI) for rescheduling the Rs 184 crore term loan it had availed earlier. The company has also had to postpone its expansion plans because of funds crunch.
Excess capacity in the glass industry coupled with aggressive pricing adopted by the company has led to losses in the last two years.
The sales of the company was lower at Rs 134 crore in 1996-97 against Rs 142 crore in the previous year. Commenting on the state of the industry officials said that while sales have gone up, realisation has taken a beating.
The pricing policy of FGI where it undercut its competitors also attracted the attention of MRTPC.
Company sources said that the next round of hearing in the case is scheduled for the end of this month. They however denied market reports that the company has an understanding with its competitors not to resort to undercutting.
The company is now focusing on curtailing costs and as part of the cost cutting exercise the company has relocated its office from Bandra to New Mumbai.