Lloyds Steel, Lloyds Metals merger within 3 months

MUMBAI, April 18: The loss-making Rs 1,267-crore Lloyds Steel's merger with its subsidiary, Rs 114-crore Lloyds Metals, would be further del...

MUMBAI, April 18: The loss-making Rs 1,267-crore Lloyds Steel’s merger with its subsidiary, Rs 114-crore Lloyds Metals, would be further delayed as the financial institutions are yet to give the green signal.

“We are expecting the financial institutions to clear the proposal within the next three months,” said Mukesh Gupta, vice chairman of the Lloyds group. Lloyds Steel’s reverse merger with Lloyds Metals has been put into the cold storage by the finacial institutions led by ICICI. All the three FIs — IDBI, ICICI and IFCI — have not accepted the 16:10 swap ratio suggested by the chartered accountants, A P Chitale & Co.

The three institutions hold over 17 per cent stake in the company and are reported to be extremely concerned over the failing health of the company. The company, which posted a loss of Rs 66 crore in the first six months of the fiscal 1997-98, is expected to end the year with more than a Rs 100 crore loss.

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“We hope that due to internal restructuring taking place, we would be ableto turn corner in the current financial,” Gupta said. He attributed the huge losses of Lloyds Steel to high costs and dumping of steel from other countries.

In order to tide over the current crisis, Lloyds has asked its lead financial institution, ICICI to convert its Rs 60 crore short-term credit into a long-term loan. Similarly, it has asked Vysya Bank to convert its Rs 40 crore cash credit facility into a short-term loan. Both banks have agreed to the company’s proposal.

The group, in its restructuring drive, will now concentrate only on steel and finance business while selling off all the other businesses. "While the steel business would be run by the family members, finance business would be run by the professionals," he said.

Gupta ruled out the company being a takeover target of any hostile bidder, though the company’s average price is below par at Rs 5. "We hold 31 per cent stake in the company… the rest is with the financial institutions and the public," he added.

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He, however, said thatthe present takeover and acquisition drive in the Indian corporate sector is welcome, which would add more depth to the country’s capital markets. "The Rs 390 crore power plant of the company will be commissioned in the current fiscal which will add substantially to our bottomline. We hope to save at least Rs 2,000 per tonne of steel after the commissioning of the power plant… we will save at least Rs 100 crore per annum," Gupta claimed.

Lloyds Steel was recently in news when the State Minister, Anil Deshmukh, threatened to cut power supply to its plant in Maharashtra due to non-payment of electricity bills.

"We are presently within the ceiling imposed by the MSEB on dues," Gupta said.

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