The Reliance group is planning to invest Rs 35 crore in the Lucknow-based India Polyfibres (IPL).
The fund infusion forms part of a rescue package which Reliance will submit to the BIFR (Board of Industrial and Financial Reconstruction).
The rehabilitation plan will entail bringing down the IPL equity capital which now stands at Rs 46.45 crore by 80 per cent to Rs 9.29 crore.
Reliance will pay off one third of the principal amount of the loans to be taken from FIs and banks immediately and the rest of the two thirds will be converted into equity at par.
Out of the Rs 35 crore to be invested immediately, Rs 28 crore will be equity at par.
This will be done through group company Reliance Petro Products Private Ltd. (RPPPL). RPPPL will enter into a comprehensive agreement with IPL which will ensure that the former buys the entire IPL production pay it according to a formula, i.e., fixed expenses + conversion costs + Rs 1,500 a tonne will be paid to the company. Thus over the years, IPL will be able to accumulate reserves.
The equity structure after the above exercise will be as follows: together RPPPL, RPG, PICIP will have an equity of 48.20 per cent with the FIs and banks having 47.92 per cent.
The rest of 3.88 per cent will be held by general investors. The total paid up capital will increase to Rs 75 crore.
The R P Goenka group will have an equity stake of Rs 4.77 crore, and Picip will have an equity stake of Rs 1.61 crore. Once the package goes through, IPL will be a debt free company.
Sources in the group told Business Standard, that after the company has been run for 3-4 years, a decision will be taken on expanding its capacity. Once the scheme goes through, Rs 2 crore will be invested in the balancing equipment, so that the plant is run at full capacity.
