NEW DELHI, Jan 25: Financial institutions have decided to fix a deadline for sale of their 45 per cent equity stake in Modi Rubber Limited to the two brothers, B K Modi and V K Modi.FI sources said that a time frame would be fixed at the heads of institutions meeting scheduled to be held next week in Mumbai within which the Modis would be told to come up with a concrete offer for purchase of the institutional holding.
"The issue has to be settled soon as it has been delayed too long. If the Modis are unable to buyout our stake within that time frame, we will look at the option of auctioning the shares," a top level source said.
The FIs are likely to press for repayment of loans by Modi Rubber before sale of their stake to the two Modi brothers.
MRL announced losses of Rs 18.55 crore for accounting year ending September 1997 on a turnover of over Rs 1100 crore.
The FIs, which jointly hold about 45 per cent of MRL's equity, have been demanding that the promoters -- V K Modi and B K Modi -- should
commit themselves to an agreement or face an auction of FI holding.
The two Modi brothers have not agreed to repayment of loans while buying FI holding. The FIs are of the opinion that if this formula is not acceptable then they will publicly auction their stake to salvage something out of a loss making company which is operating in a highly competitive industry. The FIs feel that the competition for the firm will only intensify with the entry of a number of multinational tyre companies.
Though FIs have held meetings with the Modis recently, the issue has remained deadlocked due to differences between the two sides on loan repayments. The FIs do not want to have any exposure in the company after disinvestment of their holding. On the other hand, the Modis have argued in a representation before the finance ministry that the sale of stake and loans should not be clubbed.
The recession in the tyre industry has hit the company badly. The recession has been exacerbated as tyre imports have been liberalised.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
