The Hindu Business Line : Shiva Cement gets go-ahead for financial recast package

THE Rourkela-based Shiva Cement has finally succeeded in getting its proposed financial restructuring package okayed by its consortium of bankers. It is now gearing up for its rights issue, which is likely to hit the market by the end of the current financial year (2004-05).

According to Mr R.P. Gupta, Managing Director of Shiva Cement, the bankers have agreed to reduce the interest rate on its existing loans. Moreover, a part of the loan would be converted into non-cumulative preference shares.

The company would enjoy a moratorium on interest payment till June 2005 .

At present, the company's loan principal is approximately Rs 17 crore. State Bank of India has agreed to extend an additional working loan at the Prime Lending Rate.

When queried about the reduction in the annual interest payout, Mr Gupta said that it would not be possible for him to spell out an exact figure, as final nitty-gritty of the restructuring package is pending.

"Yet, we can say that we would be gaining substantially. The weighted average interest rate of our loans have been reduced to 9 per cent from the erstwhile 17.5 per cent," Mr Gupta told Business Line.

Meanwhile, the board of directors has increased the authorised capital of the company from Rs 20 crore to Rs 28 crore to accommodate a rights issue.

It was decided that a premium of Rs 3 would be charged for a share of Rs 2 face value.

"However, we have not yet decided on the ratio or the size of the issue. That would be finalised after discussions with the merchant bankers. The board has already empowered a committee to finalise a merchant banker for the proposed issue," he said.

The board also decided to extend the accounting period by three months. Shiva Cement used to follow the January-December calendar year but it would shift to April-March after a 15-month accounting period, which would end on March 31, 2005.

In the last three years, Shiva Cement failed to register any profit. However, Mr Gupta is confident of recording a nominal profit this year.

"The financial restructuring is expected to create a positive impact on the balance sheet ," he said.

The 1.77 lakh-tonne Shiva Cement is currently not running full steam due to working capital shortage. Mr Gupta said that the additional working capital loan would boost production.

In November 2003, Shiva Cement worked out an extra commercial borrowing of $7 million (around Rs 30.6 crore) to swap its existing high-cost borrowings but had to withdraw because of an RBI guideline.

The present financial restructuring would help the company to return to black.

"All the lenders have agreed in principle to accept the proposal with minor modifications and the company expects individual sanctions by January 2005. This slight delay is due to the procedural time needed by the lenders," he said.