The Hindu Business Line : Shiva Cement's search for partner proving elusive

IT is for the second time in four years that the Rourkela-based Shiva Cement Ltd has failed to find a strategic partner despite several attempts made by its merchant banker.

In August 2003, the board of directors of Shiva Cement mandated SBI Capital Markets to search and negotiate a deal for a partner with whom the company will join hands.

Almost nine months have passed. SBI Capital Markets is yet to find the elusive partner. Shiva Cement made a similar attempt in 2000. That time too, SBI Capital Markets was given the job.

When inquired, Mr R.P. Gupta, Managing Director of Shiva Cement, told Business Line, that no development has taken on this front and currently SBI Capital Markets is "going slow".It is quite for some time now that Shiva Cement has been facing funds crunch. Industry sources said that the proposed partner was expected to bring in some money, which would have helped Shiva Cement to tide over its financial crisis.

Earlier, it worked out an attractive ECB (external commercial borrowing) of $7 million (approximately Rs 25 crore - Rs 30 crore) from the Zurich-based Habib Bank. However, it failed to materialise due to the strict guidelines of the Reserve Bank of India.

As a way out, the company made a successful preferential issue of shares and warrants by the end of the last financial year, 2003-04. According to Mr Gupta, the company raised Rs 4.91 crore through these two instruments.

Shiva Cement sold 100.9 lakh warrants and 77.96 lakh shares equity shares of Rs 2 face value. The company charged a premium of Re 0.75 on every equity share. "These funds will be used mostly as working capital," he said.

In another development, the management of Shiva Cement has decided to hold back its proposed Rs 9.5 crore rights-cum-public issue, which was scheduled to hit the market in the middle of this month.

In February this year, Shiva Cement's board of directors decided to issue 3.50-crore equity shares of Rs 2 each and charge a premium of Re 0.75. Accordingly, the authorised capital base has been increased from Rs 13 crore to Rs 20 crore.

This decision was taken after judging the recent political developments and the current fluctuations in the stock markets. "We do not think this is the right time to go for the rights-cum-public issue," Mr. Gupta said.

For the accounting period January-December 2003, Shiva Cement registered a turnover of Rs 10 crore against Rs 35 crore in the previous year. Its net loss of Rs 2.4 crore remained the same for the last two years.

The company is trying desperately to tide over this funds crisis. Recently, it had talks with its banks and financial institutions on this matter. Mr Gupta hoped that a solution would emerge soon.