• PAGE ONE
• INDEX
• HOME

Balaji group: Battling tough times

M. Ramesh

CHENNAI, March 24

FOR the past few months, anguished investors have been thronging the closed gates of RBF Nidhi Ltd, a non-banking finance company that has folded up, hoping to get at least a part of their money back.

Some gave vent to their anger, while others, fighting back tears, devise schemes to retrieve their monies. However, all have one question: How did RBF Nidhi, till recently a well-run institution, fold up.

And, inevitably, a connection with the Balaji group of Chennai, is made. A Special Officer appointed by the Company Law Board to look into the affairs of the nidhi has said in his report that the Balaji group is liable to pay the nidhi Rs. 169.07 crores towards principal and Rs. 62.59 crores towards interest, the total liability working out to Rs. 231.67 crores.

The group has committed to pay RBF Rs. 50 crores before the end of April. There is just a little over a month left to meet this commitment.

The group's flagship company, Balaji Distilleries' net profit declined to Rs. 4.55 crores in the first nine months of the current year, as against Rs. 10.56 crores in the same period last year.

Balaji Distilleries' Rs. 85-crore brewery project, coming up at Thiruvellore near Chennai, is, according to company sources, stuck for funds. ``We are getting some funds and the project should commence operations in 2-3 months time,'' a senior official o f the group told Business Line .

In January 1999, Mr. S. Venugopal, Executive Director, Balaji group, had told Business Line that the brewery would begin operations in May 1999.

The group had originally reckoned that it would be able to open the brewery in early 1999, and the funds generated by the unit could go towards financing Balaji Hotels' 5-star hotel project in Chennai.

Balaji Hotels & Enterprises Ltd is talking to the Oberoi group for the latter to take a stake in the company. Hotel industry sources say that Balaji wants to sell the entire hotel project, but when asked about this, a senior official said that negotiatio ns were on and the stake that would be offered to the Oberois was not yet decided.

The hotel, whose `soft launch' was supposed to have been made in September 1999 (the original plan was end of 1998), is now expected to be commissioned only by the end of this year.

Balaji Hotels, which has a distillery unit as well, has reported a turnover of Rs. 85.93 crores in the nine months ended December 1999, as against Rs. 175.89 crores in the same period last year. Its net profit for the period amounted to Rs. 1.93 crores, as against Rs. 7.69 crores in the first three quarter of 1998-99.

Balaji Bio-tech Ltd, which put up a Rs. 85-crore aquaculture unit in 1995, is operating fewer than 10 of the 70 ponds it started with. The group is paying about Rs. 30 crores as interest to banks and financial institutions on account of the aqua project.

Balaji Industrial Corporation, mainly into construction steel, reported a net profit of Rs. 1.88 crores in the first nine months of the current year, as against Rs. 10.10 crores in the same period last year. Its turnover also slid to Rs. 372.29 crores, f rom Rs. 453.93 crores.

According to company sources, sales are better in the last quarter, but ``interest burden is very high''. Interest cost in the nine months ended December 1999 amounted to Rs. 44.81 crores, up from Rs. 32.17 crores in the same period of last year. The Bud get has affected secondary steel producers as the excise duty has been changed from a capacity-based duty to 16 per cent ad valorem.

In 1995, Balaji Industrial Corporation bought a steel wire rods plant from South Africa which was shipped to Chennai. But by the time the plant arrived, financial institutions told the group that they did not want to increase their exposure to the group and the wire rod project had to be put off. The plant is still lying at the Chennai port and the group has been looking for a buyer for nearly three years.

The three listed companies of the group (Balaji Bio-tech is not listed) own ships too. The shipping industry is in a recession and the group has been wanting to sell off its ships. A senior official said that the process is on, but no sale has materialis ed.

Recently, there has been a spurt in share prices of Balaji Industrial Corporation, which is listed on the National Stock Exchange. In 16 trading days, the company's share price has moved from Rs. 25.50 on February 26, to Rs. 62.50 on March 24. As can be seen in the table, the volumes are not much - sometimes just a hundred or two hundred shares a day. But the prices are rising rapidly.

When contacted by Business Line, two senior officials of the group said that there was no new development in Balaji Industrial Corporation.