NEW DELHI/MUMBAI, JANUARY 19: If you're looking for a group that seems to be blessed by the country's financial institutions, and continuously gets a fresh lease of life, it's H S Ranka's Modern Group. Till around 1997, the group appeared to be doing well, making profits. It then started making losses, and began defaulting on payments - by June 1997, credit rating agencies such as CARE downgraded group companies Modern Denim, Modern Syntex and Modern Terry Towel's paper to `speculative' grade. In September 1997, for instance, Modern Threads didn't honour its fixed deposit commitments of over Rs 60 crore.By the end of the year, the financial institutions first met, asking the promoters to bring in Rs 100 crore of their own, before granting any fresh extensions - Rs 50 crore was to be brought in by December 1998 and a similar amount by March 1999. The promoters' said they couldn't and group company Modern Denim was put on the block, with Jardine Fleming appointed to find a buyer for the company - till date, none has been found.While it's difficult to prove, at this point it appears that deliberately rosy projections were presented at these meetings, with an eye to get the package through. The rescue plan projected that the group would make losses of Rs 60 crore in 1998-99. Instead, the group made net losses of a little under Rs 200 crore. Clearly, the projections went horribly wrong, though it is curious that such projections were made in March 1998 - the package was finalised in March - when the prices and demand situation were fairly well known.Under the rehabilitation package, the Rankas pledged their entire shareholding in the group (with a face value of Rs 72 crore, and a market value of around a tenth of this) with the financial institutions.The cut-off date for the package was September 30, 1998, but despite the inability of the Rankas to meet their commitments, the institutions, led by IFCI, chose to give the Rankas some more respite. The next review meeting of the institutions was held on August 16, 1999, and it was then decided that a techno-economic feasibility of the group be carried out by an independent consultant, who would also give realistic projections of sales.It was decided that a committee comprising representatives of IFCI, UTI, SBI and Bank of India be constituted to monitor matters. A few months later, the study was assigned to A F Ferguson & Co. which is expected to submit its final report by the end of January 2000. Among other aspects which Ferguson will look into `with special reference' are the group's accounting policies, inter-group investments and advances, and compliance with various statutory requirements
