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Daewoo woos FIs for loan resetting

BS Corporate Bureau

Daewoo Motors India Ltd (DMIL) plans to start negotiations with Indian financial institutions for rescheduling $198 million (around Rs 9.20 billion) worth of debt around the middle of the year.

Young-Chang Kim, managing director and CEO, DMIL, said on Friday the company owes two loans to Indian financial institutions. The first loan, which has an outstanding of $150 million, was a US currency debt. It was taken from the Industrial Development Bank of India (IDBI), ICICI and Exim Bank in 1996. The other loan, which has an outstanding of $48 million was a rupee loan taken in 1998 for the Matiz small car project.

Kim said he has set for himself the target of spinning off the engine and gearbox units of DMIL by May this year into separate companies. After that, he would initiate talks with domestic FIs for rescheduling the loan repayments.

The Foreign Investment Promotion Board (FIPB) has already rejected DMIL's proposal to convert Rs 370 crore ($82,149,000) worth of receivables payable to its parent -- Daewoo Motor, Korea, on account of raw material purchased in the past -- into the parent company's equity investment in DMIL.

The DMIL chief also said the company will invest an additional $5.35 million (around Rs 250 million) by July 2001, to launch three new models in the premium category. The three new models -- Nubira II, Lanos II and Magnus -- were unveiled in New Delhi, Friday.

Kim said the company would take a final decision on the launch date for the three new cars after the new Exim policy, to be announced on Saturday.

"The proposed investment of $5.35 million will be used to meet the tooling, machinery and equipment costs for achieving 50 per cent localisation within the first two years for the three new cars," he said. This investment will come through internal accruals, Kim added.

He said DMIL's plant near Delhi was flexible enough to produce the new cars and no major investment will be required. Daewoo India is working towards reducing costs by Rs 1.43 billion over the next two years through the ongoing financial restructuring which started in February 2000. This money would be used for meeting the fresh investments.

DMIL had achieved a cost reduction of Rs 580 million during April 2000 and March 2001 and was aiming at another Rs 850 million in the next fiscal.

On the spin-off plan for DMIL's engine and gearbox facility, Kim said the company is simultaneously talking to prospective buyers. "We will also talk to investment bankers for match-making," he added.

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