NEW DELHI, APRIL 19: The Industrial Development Bank of India is on the look out for a promoter who would invest about Rs 300 crore in the sick industrial company - Rathi Alloys and Steel Limited (RASL).Acting on the directions of the Board for Industrial and Financial Reconstruction (BIFR), the development bank would consider various options for takeover, leasing, amalgamation or merger for rehabilitating the sick company.Earlier, an Abu Dhabi party had approached RASL ready to invest in a new electric furnace, but with the condition that the operating agency - IDBI - would establish the viability of the company. As such a vetting on the viability was not forthcoming, the Abu Dhabi party did not join as co-promoter.Based on a report of Metallurgical and Engineering Consultants (India) Limited (MECON), RASL promoters had submitted a Rs 108 crore revival proposal. They had agreed to invest Rs 32.4 crore and fresh term loans of Rs 75.6 crore.However, the IDBI had opposed the proposal as theprojected profitability as estimated by RASL was considered optimistic and it appeared highly unlikely that the company would start earning net profit from the first year of recommencement of operations.In fact, the company's performance had been unsatisfactory even in a protected environment. Moreover, the performance had been continuously deteriorating thereby putting a big question mark on the capabilities of the promoters to withstand competition.According to the reworked projections of the operating agency, the company would start earning cash profit from 2001-02 onwards and net profit from 2004-05. The closing cash balance would be negative implying need for induction of interest-free funds by the promoters. The net worth would not exceed the accumulated losses during the tenth year of rehabilitation period.``The promoters would have to bring in about Rs 295 crore interest-free funds during the rehabilitation period to improve the debt service credit ratio to at least 1.33 and to strengthencash flows,'' the IDBI in its report to BIFR said.Also the operating agency pointed out that the company had focussed merely on capital expenditure in its revival package even as it ignored the huge debt problem.Even other banks and financial institutions expressed grave doubts about the credibility or feasibility of the company's revival proposal and expressed their lack of faith in the present management.Earlier, the IDBI submitted to the board that the total liabilities of the company were about Rs 185 crore. Although Mecon had valued the assets at Rs 210 crore, the value may be of academic interest as no party would come forward to take over the company.Meanwhile, the company acknowledged that it does not have the funds envisaged in the revival scheme proposed by IDBI and did not have any objection to the induction of any new management.
