Rubber business

The Industrial Finance Corporation of India has submitted a revival package to the Board for Industrial and Financial Reconstruction for the VK Modi controlled Modistone Ltd. If approved, the company will only run two divisions, and all excess machinery and manpower will be done away with. Under the package, Modistone will be required to discontinue production of tyres, tubes and flaps. Instead, it will have to run only two divisions mixing and dipping sections for rubber and fabric.
There are about employees in Modistones factories spread across the country. According to the revival plan, only about employees, including managerial staff, are required to operate the two divisions. The recommissioning plan entails a capital expenditure of about crore. The net cash generated by operating the two sections will be utilised to meet existing liabilities of institutions and banks. This will be done after adjusting the reliefs and concessions in terms of the approved package of rehabilitation. The company has taken on lease about square metres of land from Bombay Port Trust. The proposed partial operation will only require about square metres of land, while the company plans to commercially develop the surplus area.
The revival package also proposes that institutions and banks waive per cent of their outstanding dues and allow repayment of the balance in equal quarterly instalments. This will be after an initial moratorium of one and half years after recommencement of operations at per cent per annum from the cut off date. The companys outstandings to banks and financial institutions stand at crore, while the amount proposed to be waived off is about crore. The principal outstandings to other creditors like employees dues, BPT, raw materials, promoters, taxes is about crore and the waiver required is about crore. The balance constitutes the amount that can be serviced by the company. Modistone also owes crore to Modi Rubber, the promoter and holding company, payable at per cent per annum. The revival package suggests that Modi Rubber convert a part of its loan into equity to take care of the promoters contribution towards the rehabilitation scheme, apart from waiver of interest. The revival plan also envisages liquidation of all liabilities within a maximum period of seven years including the initial moratorium period. The promoters of Modistone are Modi Rubber, chairman VK Modi, and vice chairman BK Modi. Modistone was originally promoted by Firestone Tyre and Rubber company of US. Modi Rubber acquired per cent of the companys equity, which was subsequently increased to per cent. The present equity holding of VK Modi and BK Modi is about per cent. Citing labour unrest and acute shortage of working capital, the management had declared a lockout at its Mumbai factory. But this was deemed illegal by the Mumbai high court in Novemberin response to a petition filed by the Modistone employees union. The order to lift the lockout may also be a crucial factor in implementing Modistones revival plan.