3 more cos default, take shelter in roll-overs

Saurashtra Cement has convened an extra-ordinary general meeting on February 2 to modify — which is in fact a roll-over, reschdulement of repayment and cut in interest rate — the 18% non-convertible debentures issued in 1993. The company which was to repay the debenture amount in November 2000 failed to do so. Now it has proposed to repay the debentures in three annual instalments commencing in November 11, 2003 and ending by 2005.

Similarly, Indian Seamless which was to pay the final redemption instalment in September 2000 has now proposed to pay in three equal instalments commencing from June 30, 2002. "The company is presently discussing the scheme with financial institutions and banks to obtain their consent for the same," Indian Seamless said in a letter to shareholders. HDC has submitted the draft letter of offer for roll-over of its debentures series IX with the SEBI for vetting. "SEBI has asked us to submit the Letter of Offer in the revised format," the company said in a letter to investors.

Said Sampat Tibrewala, an investor who put money in these companies, "as these companies have been incurring heavy losses, how safe is our money. If these companies are referred to the BIFR as sick units, there is no chance of getting our money." While Saurashtra Cement made a loss of Rs 37.4 crore for the year ended June 2000, Indian Seamless made a loss of Rs 22.7 crore and HDC Rs 74.5 crore loss for the year ended March 2000. In fact, according to market sources, at least three dozen companies like Bombay Silk Mills, Cifco Finance, Pennar Aluminium, Jindal Vijaynagar, Core Healthcare and Essar Oil have already defaulted on their debenture repayments.

"I wrote 308 letters to the SEBI and the company to recover my money in the debenture issue of Core Healthcare," said an investor. In most of the cases, investors had put their entire life savings in the debentures — which were till recently considered as a safe investment avenue by investors.

The result of such defaults is already visible. A survey sponsored by the IDBI and conducted by the Delhi-based Society for Capital Market Research and Development has revealed that household investors are still shy of purchasing scrips and private company bonds and show the highest preference for safe type of instruments like bank fixed deposits, mutual funds and government saving schemes.

The survey on "Indian household investment preferences" shows that corporate bonds are at the bottom end of such tastes in all income classes. It also states that "today foremost importance is the need for restoring the investor confidence in private corporates which requires a really credible programme of corporate governance reform."