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PCL fails to placate creditors

Creditors, not convinced by the proposed scheme of compromise, wanted the company to come out with a modified or alternate plan at the earliest.

T O D A Y

• Canadian connection • Hi-tech software sale • PCL creditors unhappy • IT.COM '98

PCL had proposed to make a one-time lump sum payment to all its creditors including fixed-deposit holders-millennium scheme depositors as well as statutory and other creditors-within a month from the date of disbursal of fresh funds from the Industrial Development Bank of India.

In the event of non-disbursal of funds from IDBI, the company proposed to pay all its creditors in 12 equal quarterly instalments starting from or before the expiry of nine months from the "effective date". The date on which the certified copy of the order of the Calcutta high court sanctioning this scheme is filed with the registrar of companies, West Bengal is the "effective date''.

Opining that PCL is "well competent to recover from the temporary financial crunch'', IDBI had recommended an infusion of Rs 1.24 billion. However, the stalemate continues as at a meeting of the consortium of banks in February this year there was no unanimity among the funding agencies, according to the sources.

However, at the meeting, PCL Chairman Dadan Bhai did not have a convincing answer as to how the company would manage to mop up funds in the event of banks not coming forward to reinfuse funds, the sources said.

He is understood to have assured creditors that PCL will come out with an alternate/modified payment plan in the next couple of months.

In September 1996, PCL launched the 'Millennium Scheme' for sale of computers at competitive rates ranging between Rs 18,499 and Rs 48,499. The response to the scheme was unprecedented. About 20,500 people subscribed to purchase computers aggregating around Rs 700 million. PCL did not anticipate such huge demand and, as a result, could not adhere to the supply schedule. As a result, the various subscribers started proceedings against the company in the consumer fora and other civil courts.

About 2,000 individuals have claims aggregating about Rs 100 million. Further, the company has invited sums in a fixed deposit scheme repayable with interest at the rate of 15 per cent per annum. But the company could not pay the amount or the interest within the stipulated time.

At the meeting in Calcutta, Dadan Bhai is understood to have told creditors that the company "always worked relying on short- term working capital loans''.

"This was primarily because the industry segment was not very capital intensive. Relief on term loan came in 1992 and that too for the business diversification into the electronics contracting manufacturing area - a hardware export business.

"Consequently, the company always had a huge interest burden which was compounded by the fact that the market was actually being opened up and the business was on a ramp.

"But the growth was never supported by any funding agency - banks/ FIIs - though the support was in terms of raising the loan limit,'' he said.

"But the disbursement was always delayed, ranging from three months to not even disbursing it. Now, looking at the situation, while, at one side, the company was growing on the commitment from the banks to support the growth, on the other hand, the banks were major impediments in breaking the company's growth. Obviously, the result was that the company started choking in terms of business and cash inflow.''

- Compiled from the Indian media

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