The Hindu Business Line : Phaarmasia plans capital reduction

PHAARMASIA Ltd, the ailing pharmaceutical formulations manufacturer that suffered complete erosion of net worth, proposes to go in for a capital reduction programme and reorganise the capital structure by raising fresh funds.

As on April 1, 2003, its total accumulated losses stood at Rs 19.61 crore as against the paid-up equity of Rs 9.13 crore.

The management is of the view that infusion of further funds into the company would not benefit any existing shareholder even if itregisters profits in the coming years since no dividend can be paid out of profits unless accumulated losses were wiped out.

Accordingly, the company has finalised the capital reduction scheme under which the accumulated losses would be reduced to the extent of reduction of capital and revaluation of assets.

As a part of this scheme, the company plans to reduce its paid-up equity capital from Rs 9.13 crore consisting of 91.34 lakh shares, to Rs 1.82 crore consisting of 18.26 lakh shares of Rs 10 each.

In terms of this, Rs 8 would be extinguished out of every equity share of Rs 10 paid-up.

Subsequently, Phaarmasia proposes to raise additional funds to the tune of Rs 5 crore by way of issue of 50 lakh equity shares of Rs 10 each in favour of promoters and associates and unsecured creditors.

Of this, the promoters and associates would bring in Rs 2.5 crore and the balance amount of Rs 2.5 crore of unsecured loans would be converted into equity shares.

According to the scheme finalised by the Phaarmasia board and submitted to the stock exchanges and the Andhra Pradesh High Court recently, the allotment of shares to promoters and associates would be completed in two or more tranches.

However, the entire amount would be brought in within the time period not exceeding 12 months from the effective date.

The assets of the company as on appointed date (April 1, 2003) as per audited financial results stood at Rs 12.65 crore and after depreciation at Rs 4.11 crore.

As per the valuation certificate given by the Chartered Engineers, the revaluation of assets stood at Rs 16.51 crore.

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