• JUNE 14, 1999

FIs, S K Birla group clash

Financial Institutions (FIs) have opposed S K Birla-owned Mysore Cements' plan to hive off its power units into a wholly-owned subsidiary at an estimated cost of Rs 2 bn.

The main point raised by IDBI, ICICI and IFCI who are lenders to Mysore Cements, is that the transfer of assets has been proposed at market value as opposed to book value. The FIs have pointed out that the cost of such transactions should be on the basis of book value rather than at market value. The FIs also indicated that they would have had no objection however, if the power plants were sold to a third party.

Mysore Cements has power plants at Ammasandra and Imlai (captive power plant for Damoh Grinding) and at Jhansi. Another 15 MW plant was also expected to be commissioned at Damoh. In its proposal to the institutions, Mysore Cements has estimated the book value of the power plant at around 600 m for which the FIs have raised objections.

The FIs have also opposed the company's proposal to reduce its interest rate by 3% on its outstanding loans to 16% from 19%. However they have agreed in-principle to restructure its outstanding loans as the cement industry is under a slow pace of growth over the past 4 years.

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