The Hindu Business Line : Sterling Holiday active on revamp plans

THE Sterling Holiday & Resorts stock has begun to move up with huge traded volumes as the market sensed the end of financial problems for the loss making time-share company. The counter finished with a gain of 7.21 per cent at close today and over six lakh shares changed hands on the BSE.

The management has proposed preferential allotment of equities in lieu of secured credits to reduce the interest cost, which has pushed the company into the red.

According to sources close to the management, the company board has planned to issue around 2 crore shares of Rs 10 each at a premium. Of the total shares meant for preferential allotment, around one crore is slated to be placed with a private bank and the rest to other creditors. This follows a recent arrangement with creditors with first and second charge.

An EGM is scheduled on April 15 to discuss fresh issue of shares on a preferential basis up to a limit of Rs 30 crore. Approval for borrowing up to Rs 200 crore is also on the agenda. The issue would be made through convertible warrants with a premium of Rs 7.50 at a price of Rs 17.50.

According to analysts, the measure would improve the profitability on account of substantial fall in interest payouts. The company had a secured loan Rs 145.67 crore and unsecured loan of Rs 23.86 crore as on March 31, 2004 and the interest cost for six months to that date worked out to Rs 8.30 crore.

It had recorded a loss of Rs 2.82 crore for the six-month period to March 31, 2004. The accumulated loss till then was Rs 34.11 crore. The paid-up capital is currently placed at Rs 18.22 crore. In the first three quarters of the 2004-05, the losses have mounted to Rs 9.91 crore.

"The company's financial restructuring follows a management restructuring. All these should see it through the tunnel in the coming quarters. However, improvement in marketing and management efficiency would be the key to growth of the company in the future," said a fund manager.

According to Mr Rajesh Agarwal of CD Equisearch, the company has sizeable properties across the country at popular tourist destinations. With steadily increasing inbound foreign tourists traffic and improvement of domestic tourism, opportunity of leveraging the existing assets could pave way for a healthy turnaround.

With additional funds, in form premium, and provision for new loan liquidity should also be better. The current interest rates ruling much lower than that a decade ago, it may not be exerting the kind of pressure that previous borrowings did on the company's books, he felt.

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