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SPIC turns potentially sick

By Our Special Correspondent

CHENNAI SEPT. 29. Southern Petrochemical Industries Corporation (SPIC) has become a `potentially sick' company following erosion in its net worth by over 50 per cent.

Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985 has made it compulsory for a company to report erosion in net worth by over 50 per cent to the Board for Industrial and Financial Reconstruction (BIFR).

According to the audited financial accounts of the company for the year ended March 31, 2003, the company's accumulated losses were to the tune of Rs. 591.20 crores. The peak net worth of the company in the preceding four financial years was Rs.653 crores. As a result of this erosion, the net worth stands at Rs.10.93 crores as at the end of March 2003. A write-off amounting to Rs. 222.01crores during 2002-03 is among the chief reasons cited for this erosion in the net worth.

The company has called a meeting of the shareholders on October 22 to take cognizance of the erosion in net worth and report the same to BIFR.

According to an explanatory note attached to the notice calling for the shareholders' meet, the company had to write off Rs. 105.73 crores during 2002-03, being the interest charged to SPIC Petro, the jinxed venture of the company, on the advance against equity for April 2000-March 2002. Further, interest and exchange fluctuation amounting to around Rs.116.28 crores, carried forward in capital work-in-progress as of March 31 2002, were written off during 2002-03.

The explanatory note also cited the unexpected grounding of the company's fertilizer project in Dubai, the policy as well nature-ordained drop in fertiliser production, the inability of the SMO division to participate in major power projects for assorted reasons and the like and suggested that these had only compounded the misery.

The tag of `potentially sick company' comes even as SPIC is currently through a Corporate Debt Restructuring (CDR) programme.

A restructuring of loan, moratorium on repayment and easy interest on cash credit facility are among the salient features of the CDR programme, which is currently on. The CDR initiative has also made disinvestment of non-core business compulsory.

The pharma and biotechnology operations are said to be part of the disinvestment agenda.

The CDR programme has also envisaged induction of promoter funding to the tune of Rs.20 crores into the company in the form of equity.

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