Friday, December 14, 2007

Shree Synthetics to focus on NFY in revival plan

SHREE Synthetics Ltd (SSL), the ailing Shreekant Bangur company, has begun changing its product-mix so as to focus on nylon filament yarn (NFY) as against polyester filament yarn (PFY). This is part of the company's revival strategy.
Informed sources said that nearly 6,500 tonnes of SSL's 11,000 tonnes capacity at its unit at Ujjain in Madhya Pradesh had been earmarked for NFY, with the remaining being used for production of PFY. Earlier, the share of NFY was 4,000 tonnes. Sources at tributed the shift to scope of higher realisation and value-addition.
This strategy is being pursued along with a financial restructuring plan which would reduce the Rs. 110-crore accumulated loss by Rs. 36 crores.
SSL, which was referred to BIFR in August 1997, is carrying on parleys to finalise a Rs. 42-crore revival plan worked out by Industrial Reconstruction Bank of India (IRBI), its operating agency.
As part of its financial recast blueprint, SSL planned to reduce its Rs. 20-crore share capital by 60 per cent. There were also plans to appropriate Rs. 24 crores from its free reserves to reduce losses.
As per the revival plan, while Rs. 12 crores were proposed to be spent on replacement and debottlenecking schemes, some investment was also proposed to be made on balancing equipment. Another Rs. 2.3 crores were to be spent on VRS to effect a 10 per cent reduction in the 1,800 strong workforce. The balance would be required for meeting the working capital requirements. SSL also planned a wage freeze during the rehabilitation period. Currently, negotiations are on with the unions in this regard.
The revival plan would be funded through contributions made by the promoters and their associates (Rs. 12 crores), need-based funds support by banks (Rs. eight crores) and internal accruals (Rs. 80 lakhs). A sacrifice of around Rs. 21 crores has been env isaged in the rehabilitation plan by banks, FIs and some other agencies. FIs and banks together have a 35 per cent stake while the promoters and their associates hold a 25 per cent share. The balance is with the public.
The cut-off date for the revival scheme, which has a seven-year timeframe, was March 31, 2000.
Explaining the reasons behind the losses, sources said that high prices of raw materials, coupled with poor realisations and high level of imports, were resulting in very poor margins, especially in PFY, where there was over supply.
Although in the last Union Budget, the excise duty slabs for PFY were restructured, it provided only marginal relief and SSL's losses continued.

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