The Hindu Business Line : Shree Synthetics fate hinges on capital infusion, revival package

IN lieu of a Calcutta High Court order, the management of the ailing Shree Synthetics Ltd has reduced its capital base by 80 per cent and has also merged an investment firm into itself.

Now, the fate of the company, which is a producer of nylon and polyester filament yarn, depends crucially on two factors. The first is fresh capital infusion by the promoters led by Mr Shreekant Bangur. The second is immediate approval of a revival package by the banks and financial institutions.

According to industry sources, the capital base of Shree Synthetics, whose factory is located at Ujjain in Madhya Pradesh, has been reduced to Rs 1.55 crore from Rs 8.85 crore.

The face value of the company's equity shares has been reduced to Rs 2 from Rs 10. Thereafter five equity shares of Rs 2 face value will be consolidated into one equity share. The existing reserves and surplus of the company is also being appropriated with the debit balance of the profit and loss account.

The company is also merging New Horizons (Chennai) Ltd into itself. Industry sources said that this is an investment firm with a capital base of Rs 50 lakh. With this move the promoter is infusing some amount of money into the company.

Shree Synthetics was referred to the Board for Industrial & Financial Reconstruction in 1997. Sale notice was issued by the operating agency, Industrial Investment Bank of India (IIBI).

Apart from Mr Bangur, another firm by the name of Kothari Development responded to it. The Bangurs have already submitted their revival package but till date it has not been approved.

The bankers - Union Bank of India, Punjab National Bank and SBI Commercial & International Bank Ltd - have continued charging an interest as high as 19-20 per cent.

Union Bank, even, invoked the provisions of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act but it was held back by an order from the Supreme Court.

Despite the poor financial position of the company, the factory was kept operational. In the last seven years it registered capacity utilisations of 60-70 per cent. Shree Synthetics, which employees around 1,800 people, is recording an annual turnover of Rs 125-130 crore. During 2002-03, its net loss was Rs 20 crore.

"The promoters will have to pump in more money. At the same time the banks and financial institutions should approve the revival package. If the factory can run at 100 per cent capacity utilisation, Shree Synthetics will turn around because the overall textile market is looking upwards," sources said.