In an interesting development, bankers to the controversy-ridden Dunlop India Ltd admit that a liquidity crunch is one of the main ailments that has the Manohar Chhabria-owned company in deep trouble.
Despite this admission of fund shortage being a prime cause of concern for the tyre major, none of the member banks of the consortium which lends to Dunlop appear willing to hike its credit exposure to the company, at least not in the near future.
An official of a bank which lend to Dunlop points out that working capital requirements of any company are broadly assessed to be about 20 per cent of the company's turnover.
With Dunlop's turnover stan-ding at just a shade under Rs 650 crore for the 15 months ended March 31, 1996, a conservative estimate of its working capital requirement of the tyre producing company would put the company's requirements for working funds at over Rs 100 crore.
As against this, the company's credit limits stand at less than Rs 40 crore. Little wonder then that the company appears cash crunched. And its bankers, are clearly not willing to do anything to alleviate the problem.
In fact, the working capital credit limits of the company have not been revised for nearly eight years now despite repeated requests by the company.
A clear indication of the bankers' unwillingness to risk any more money in this trouble-ridden company.
However, bankers point out in their own defence that no formal proposal has been made by the company for any such renewal, at least not in the recent past.
Bankers point out that the company is currently operating at 30 to 35 per cent of its total capacity. One reason for this, they admit is a liquidity crunch that has gripped this once-upon-a-time cash-rich company thanks to alleged diversion of funds by chairman Manohar Chhabria and the loss of confidence of its bankers, they say.
According to some bankers in the consortium, even ANZ Grindlays, the lead banker to Dunlop, has lost interest in the company which once used to be one of its blue-chip clients. Grindlays, it is alleged, is itself not willing to increase its credit exposure to the company beyond its current level of exposure.
Also, it is widely felt amongst senior banking circles that the company, though still a market leader in aviation tyres and industrial belts segment, is steadily losing out to players like MRF Ltd and Ceat Tyres. The fact that the company has almost disappeared from the advertising arena, Dunlop's bankers feel, has added to the company's losing out on market share.
