However, B Ravi, vice-president (finance) and company secretary, says that this proposal has been shelved now and the resolution is being withdrawn. The funds are now going to be utilised as planned earlier. Though the company declined to comment on the change in plans, the hand of institutional shareholders and term lending institutions cannot be ruled out behind this change of heart.
Though this may be positive from the point of corporate governance, the fact that the company lost interest in the denim expansion indicates that the project has turned unviable. In such an event, it could have taken the example of Jindal Drugs and returned the rights issue proceeds to the shareholders along with interest.
The delay in implementation are due to change in technology, project size and location, say company sources. The project, when implemented, is said to be delayed only by six months, says Ravi. The project should have commenced commercial production by March 1998.
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Though the company has disappointed its shareholders, it is ready to raise further equity to fund more diversification and expansion projects with an outlay of Rs 200 crore. Ravi is confident of raising these funds by placing these shares as FDI. However, foreign funds, which have invested earlier in the company, have suffered, and more are unlikely to follow suit.