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Ebate
January 01, 2001
Out
of the woods, says Essar
Last week, this writer received a call from Shashi Ruia, chairman of
the Essar Group which has been making headlines mainly because of its
defaults and overdues to financial institutions. It has also sued us
for defamation. Ruia had this stunning revelation to make. He emphatically
says that after the recent restructuring of his loans he has no outstandings
at all to the financial institutions in any of his companies. We point
out that IDBI’s note for the latest Senior Executives Meeting (SEM)
of the financial institutions continues to list outstandings in several
group companies. Ruia insisted that it was not true. We ask him why
he does not sue the financial institutions for stating wrong facts and
replies that it is exactly what he is planning to do.
He also plans to take them to task for the constant leakage of confidential documents (to us), he says. Just for the record, here is what the latest IDBIpapers say. On October 1, IDBI’s exposure to the Essar group excluding Essar Steel was - Rs 3042 crore sanctioned, Rs 1884 crore disbursed, total exposure was Rs 2895 crore and overdues were Rs 623 crore including principal and interest. Of these Essar Oil owed Rs 203 crore, Essar Power Rs 109 crore and Rs 23 crore in Essar Shipping. Essar Steel’s overdues on that day alone were Rs 286 crore and IDBI’s exposure to the company accounts for 51 per cent of its networth of Rs 1147 crore. This does not include the exposure to the pelletisation plant which is hived off as High Grade Pellets limited and is not considered a separate company. Maybe this is just a beginning.
Steeling for a glut
While on steel companies, ICICI’s eagerness to finance yet another
steel project is the buzz among some corporate houses. Even though the
steel industry is in the dumps, ICICI is apparently inclined to fund
Bhushan Steel’s Rs 400 crore cold rolled steel project with a captive
power plant near Ratnagiri in Maharashtra. None of the other institutions
are willing to fund the project because they want no more exposure to
the steel industry, so ICICI is all set to fund it alone. Curiously,
it argues that the Maharashtra based project will give Bhushan Steel
geographic reach and coverage and its port based location will give
it an export advantage. ICICI argues that Bhushan’s clean track
record makes it an attractive borrower. Industry sources believe that
the biggest attraction is Bhushan Steel’s willingness to pay a
hefty front end fee of one percent plus negotiable project appraisal
charges - these fees would go straight to its bottomline. Steel sector
experts, however, argue that it is absurd to look at the track record
of an individual company in isolation. All the big steel companies have
been in trouble and benefited from the financial institutions’
compulsion to evergreen their loans. Financing yet another project,
ostensibly because of geographical considerations sounds absurd because
it will only add to over capacity in the industry. All that the FI would
end up doing is to add to the woes of its existing borrowers and further
jeopardise its loans. Are there other merits which are visible only
to ICICI?
Setting a trend
The millennium has ended with a burst of nostalgia for the Parsi way
of life. A beneficiary is Sooni Taraporreviewa whose book on the Parsis’
has apparently been snapped up through advance copies way before its
release and is a hot New Year give away from the corporate sector. The
list of buyers acknowledged by the publishers include — Nadir Godrej
of Godrej Soaps, Jamshyd Godrej of Godrej & Boyce, Jamshed &
Cyrus Guzder of Airfreight, Asim Ghosh and Sunil Mehta of Orange, The
Sir Jamsetjee Jeejeebhoy Benevolent Trust, Firdausi Jussawalla of Air
India, Krishna Kumar of Indian Hotels, Sanjiv Malhotra of The Oberoi,
The Merwanjee D M Jeejeebhoy Trust, Nasser Munjee of IDFC, Nanoo Pamnani
of Citibank, Deepak Parekh of HDFC, Cyrus Poonawalla of The Serum Institute
of India and Ratan Tata of the Tata Group. So far, book writing has
been sponsored by individual corporate houses if the subject was of
specific interest to them. Bulk sales to big corporate houses may well
be the beginning of a new trend in marketing non-fiction and research
based writing?
Tailpiece:
It is getting better and better being on the boards of top companies.
ICICI, we are told, has equipped its outside directors with the tools
to keep a better watch on its activities. Each of them is to get a fancy
note book computer with all the frills. The catch is that ICICI has
such a high profile set of independent directors that we wonder which
of them would need this equipment.
Updated weekly.
The author's e-mail address is: suchetadalal@yahoo.com
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