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Saturday, Jun 14, 2003

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Corporate - Sick Units

Pennar Profiles unsure of revival

C.R. Sukumar


PENNAR Profiles Ltd (PPL), the ailing aluminium profiles manufacturer belonging to the Hyderabad-based Pennar group currently under the purview of the Board for Industrial and Financial Reconstruction (BIFR), is highly unsure of its viability in the backdrop of current debt burden and accumulated losses and interest.

The company, which suffered a loss of Rs 5.65 crore on a turnover of Rs 60.59 crore during the year ended December 2002, has accumulated losses of Rs 30.52 crore on an equity base of Rs 5.48 crore. While the company's secured loan burden stood at Rs 36.17 crore, the unsecured loans amounted to Rs 2.33 crore.

Though BIFR had declared the company sick way back in July 1999 and appointed IFCI as the Operating Agency to prepare and submit a draft rehabilitation scheme for the revival of the company, none of the proposals received were found acceptable to the banks and financial institutions so far.

In a communiqué to shareholders, the PPL Chairman, Mr N. Kondal Rao, said many companies in this industry had become sick, were closed and some were currently under liquidation.

``Our company has been barely surviving due to exports and with little presence in the actual consumers market. With the present debt burden and accumulated losses and interest, the company's viability is in doubt.''

The management is of the view that the turnaround would be possible with the help of further exports, provided the debt burden was reduced. However, it informed the shareholders that, ``The proposal given by the promoters for debt restructuring did not find favour with the secured creditors.''

BIFR had finally directed the Operating Agency to advertise in leading newspapers to invite new promoters for takeover of the company who would settle dues to institutions and banks to their satisfaction during early last year. IFCI received three bids in response to the advertisement, including the one submitted by a German company proposing to pay 50 per cent of the principal dues upfront to the secured creditors amounting to Rs 10.3 crore. This proposal also envisaged restructuring of equity, unsecured loans and other unsecured creditors.

However, once again, none of these proposals found favour with the institutions. Communicating the same to the BIFR recently, IFCI has sought further directions, the PPL management told shareholders.

Owing to inadequacy of operating margins, the company did not provide for interest, liquidated damages and other penalties on term loans and working capital loans availed from the financial institutions and banks during last year. The management expects the operating agency to consider these issues while working out the rehabilitation package.

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