Ashima plans rights issue in debt rejig move

"We are planning a rights issue through Nachmo Knitex, one of our group company to raise funds for debt restructuring," said B Ravi, vice-president, corporate finance and company secretary, Ashima Group.

The board of directors of the company is expected to meet by April end to decide on the date of the issue and the ratio of shares to be issued. The company, at present, has a debt of around Rs 300 crore.

The company's expansion plans will follow the debt restructuring exercise. However, the company is upbeat about its prospects and has discounted all fears of any long-term adverse effect from the accumulated losses.

"Financial restructuring is an on-going process. We are restructuring our finances in an attempt to ease the debt burden of the company and are in talks with our creditors to reduce the interest rates," said Ravi.

The company's financials have deteriorated, with interest costs staging a sharp rise in the past few years. The company has posted net loss of around Rs 94 crore on net sales of Rs 470 crore in the last financial year ended on December 31, 2004. The company's financials had deteriorated following its merger with a sick textile mill, Ahmedabad New Cotton Mills, in 2001.

"The rights issue is not the only option for raising funds. We are keeping our options open to raise funds through other means," said Ravi.

The company has also approved the proposed scheme of arrangement and compromise with its creditors, with reference to the Gujarat High Court's order dated October 25, 2004, directing the company to call the meeting of its secured term creditors, secured working capital creditors, unsecured creditors and priority creditors.

Its Indian promoters hold about 28.28 per cent stake in the company, which include NKL's 1.02 per cent stake. Foreign stake (NRI, OCBs and FDIs) is at 21.68 per cent.