His reasons: ‘Soviet wreck, falling rupee’

ICCL, which makes chrome alloys vital to global stainless steel industries, had repaid Rs 45 crore earlier and has added on Rs 52 crore since January 2000. That’s when the company began a turnaround, well before the new law was passed by Parliament last month.

‘‘What’s holding us back is the red ink accumulated over the last 10 years,’’ says Subhrakant Panda, ICCL’ joint managing director and son of chairman and founder Bansidhar Panda, a metallurgist who founded the group after returning from the US in the 1960s. There’s no denial here, just a plea for its drained FIs to be, as Panda puts it, ‘‘a little sympathetic’’.

If ICCL’s lenders do choose to be sympathetic, they will have to take a hit of a few hundred crores.

The crux of the debt centers around Rs 418 crore in forex, an amount that has ballooned over the years because of a plunging rupee. ‘‘We have neither spent it, nor has it been available to us,’’ argues Panda. ‘‘We didn’t cause it.’’

But, as the MBA from Boston University acknowledges, neither did his bankers. After consultants appointed by lead bankers IDBI said a turnaround for ICCL was indeed possible, a restructuring proposal is presently with the bank. But with accumulated losses exceeding Rs 1,000 crore, the company’s future now hinges on the generosity of its bankers.

Here are some of the things that Subhrakant Panda, the IMFA Group founder’s younger son, blames for his company’s debt mountain, one of India’s largest: the breakup of the Soviet Union, vested interests that, for a decade, prevented possession of chrome mines vital to his business, and foreign exchange fluctuations.

All of it is true. But middle-level bank officials grouse at their lifestyle and influence — lush farmhouse in Delhi, mansion in Orissa, houseguests like the Shankaracharya of Kanchi, political connections as evidence the Pandas were wilful defaulters all these years.

The Pandas are admittedly rich, and they are substantially well-connected (Subhrakant’s elder brother Bijayant, a director on the board, is a Biju Janata Dal MP). But a critical difference between them and other defaulters is that they actually seem to want to turn their company around.

Moreover, their connections didn’t seem to help in their battle with the Tata Group for chrome-ore mines. No workers have been laid off during these years of red ink and losses, and there are no allegations of diversion of money.

If anything, money is being moved from the parent company to bail out the ailing ICCL. Today, 85 per cent of the cash flows of both companies are committed to repaying loans, says Panda.

HOW THEY GOT THE MONEY

After he returned from the U.S. in the 1960s, Bansidhar Panda succeeded in his dream to make it big in his chosen field — metals and ferro alloys.

His first venture, IMFA, was successful, and so when liberalisation dawned, it seemed a good idea to produce charge chrome, an alloy needed by the world’s steel industries to make stainless steel.

ICCL was conceptualised as a 100 per cent export chrome-alloy complex with a 108 MW power plant, which today not only meets group needs but feeds the Orissa state grid. It was supposed to cost Rs 187 crore, Rs 48 crore as equity and the rest as debt. The project cost ballooned to Rs 219 crore and later to Rs 303 crore in 1990, overruns that company officials blame, among other things, on customs delays.

Most of this debt was financed through low-cost foreign loans, which have now turned out the heaviest of their burdens. The rupee was running at Rs 14 to a dollar when they took the loans; today it hovers around Rs 48. ‘‘That Rs 418 crore (in forex fluctuation) is an albatross around our neck,’’ sighs Subhrakant Panda.

But the Pandas’ original miscalculations began with the project’s viability. The project was conceived when the international price for the alloy was 60 cents a pound. They did their costing at 52 cents a pound, leaving the margin as a hedge.

They didn’t see the disintegration of the Soviet Union, and the subsequent flooding of the market for ferro chrome by newly freed and cash hungry producers from Kazakhastan willing to undercut the market. Prices crashed calamitously to 26 cents a pound.

The fact that ICCL is an export unit should have been helped with foreign exchange fluctuations, but the company worked in fits and starts for want of captive mines. ICCL struggled and won a battle in the courts in the late 1990s to get the mines, supposed to have been allocated to them as part of the licence given in the previous decade.

‘‘We were sitting ducks until the chrome mines came along,’’ says Panda. An operational turnaround began in January 2000. Loan repayment began the same month. ‘‘If we had the mines even a couple of years earlier, we have turned it around much earlier,’’ he adds.

AND HOW THEY GOT AWAY, OR DIDN’T

ICCL’s largest creditor is IDBI with accumulated interest and principal totalling Rs 493.28 core, followed by IFCI with Rs 161.50 crore. Andhra Bank, Vijaya Bank, Union Bank and Punjab National are some of the others who have classified most of their loans to ICCL as non-performing assets.

Panda says apart from running his plants at full tilt and committing most of the cash flows of the group to repayments, there isn’t much else left.

‘‘We have no more aces,’’ says Panda, who now pleads for sops that will allow ICCL to become a viable company. For once, in a landscape of companies disappearing down legal escape hatches and indulging in financial skulduggery, the company’s bankers can’t find too much wrong with the reasons for default.

‘‘The company had been defaulting because of circumstances which were beyond the control of the management,’’ says an IDBI official, confirming that the failure to get captive mines and the ferro-chrome price debacle hit operations.

Panda says the company has now solved all its problems. The alloy price has climbed to 33 cents a pound — not great but sustainable — and ICCL has contracts with steel makers in Korea, Japan and Taiwan; some part is also sold in India.

But the future depends entirely on the restructuring. ICCL is asking for penal interest waivers, a moratorium of repayment of loans, reduction of interest rates and a write-off on some part of the forex debt.

But the company’s losses exceed Rs 1,000 crore and only an infusion of more funds can help it recover. ‘‘Once we no longer figure as a hot potato, we can think of attracting a strategic investor,’’ confirms Panda. ‘‘Today, no one will look at us.’’

And what if the debt restructuring doesn’t work? ‘‘If the company is saddled with a debt that’s not sustainable, Panda says laconically, ‘‘Next year, The Indian Express will be doing another story on us.’’