HMT restructuring gets GoM nod

NEW DELHI, AUG 22: The Group of Ministers, led by the Finance Minister Yashwant Sinha has cleared the restructuring proposal of Hindustan ...

NEW DELHI, AUG 22: The Group of Ministers, led by the Finance Minister Yashwant Sinha has cleared the restructuring proposal of Hindustan Machine Tools Ltd HMT. The restructuring proposal is now expected to be put forward before the Cabinet.

Talking to The Indian Express, sources associated with the restructuring of HMT said that though the GoM has cleared the proposal, the financial institutions are yet to receive any communication to this effect from the various ministries. The formal ratification and communication to the various FIs is expected only after the cabinet clears the proposal, sources said.

The proposal submitted by HMT before the institutions has two aspects 8211; financial restructuring and structural changes. According to the financial restructuring proposal, the financial institutions would waive off the compound interest and the liquidated damages of the company. The liquidated damages consists of the penal charges which the company is supposed to pay due to default on the timely payment of the loan component.

The company had also proposed rescheduling of the 75 per cent of the simple interest of the loan component outstanding before the instituitons. Apart from this, the proposal also suggests conversion of 30 per cent of the principle of the loan component into equity for the FIs.

The rest of the component of the loan outstanding, ie 70 per cent of the principle and 25 per cent of the simple interest would be resolved through a one-time settlement scheme in a time frame of three years.

The structural changes which has been laid down in the restructuring proposal recommends spinning off of the three divisions 8211; machine tools, watches and tractors 8211; into three separate subsidiaries. To go ahead with the restructuring process, HMT had also drafted an exhaustive Voluntary Retirement Scheme VRS.

Industrial Development Bank of India IDBI in the lead financial institution in the consortium for HMT. The other FIs in the consortium include Unit Trust of India UTI and ICICI Ltd.

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Concerned at the delay in the mandatory clearences of the restructuring, the institutions had earlier written to the finance ministry to hasten the process. Subsequently, the government had set up the GoM, which was headed by the Finance Minister to look into the proposal before taking up the matter in the Cabinet.