The Board for Industrial Finance and Reconstruction (BIFR) has asked the Industrial Development Bank of India (IDBI) to scrap the deal already finalized for the sale of Hindustan Antibiotics Ltd (HAL). As per the deal, HAL was to be sold for a sum of Rs.5 crore to K.P.Pharmacetuicals Ltd as it has been the highest bidder.

The BIFR decision now to scrap the finalized deal and call for a fresh bid is in the wake of reports that PSU is being sold at a grossly undervalued sum to K.P.Pharmaceuticals.

The BIFR, now, has also ordered IDBI to go for a re-tender for the sale of Hindustan Antibiotics without offering the surplus assets belonging to the company. The IDBI, which invited takeover proposals from private sector a couple of months ago for the company had shortlisted the Mumbai based KP Sales as highest bidder.

The company has a surplus land of around 350 acres, which is currently valued at more than Rs 400 crore will be adequate to pay off its outstanding liabilities. Currently, the estimated value of the company including the assets and its holdings in other joint ventures is around Rs 900 to 1000 crore. The valuation of the company comprises of the value of the fixed assets including the land and plant & machinery besides the 54 products including pharmaceutical and veterinary brands.

It may be mentioned that when the bid was invited there only two bidders, KPPL and the Pune based Tombre Group. The KPPL, is a joint venture of the Mumbai-based K P Sales and the US based K P Pharmaceutical Technologies Inc. After the bid was opened, the sources from K P Pharma had confirmed that the deal is final and the Board has to just complete its stamping formalities. According to Harvinder Singh, managing director, KPPL, since his company's proposal to takeover the company involves Rs 5 crore as the initial fund infusion, it will bring in another 25 crore into the company in the first month for revival purpose. Apart from this KPPL would pay off the outstanding debts of the company, which includes the loan from government, banks and FIs. "These liabilities, which will be completely paid off by March 2004, would cost them more than Rs 400 crore," he said. The KPPL proposal also offers a VRS scheme for 500 employees of HAL with Rs 15 crore for which the initial payments will be used.

It is learnt that the KPPL was in talks with the Bankers and other creditors directly to make convince them that the privatization would lead to easy and quick settlements of their dues. Singh told that he has already met State Bank of India, one of the major lenders to the company with current liability to the tune of Rs 55 crore and Canara Bank with Rs 75 crore liability and in the process of working out liability settlement schemes. The actual loan from SBI and Canara Bank to the company was Rs 27 crore and 35 crore respectively. However, the latest BIFR decision was announced after a joint lenders meeting (JLM) called by the Board on December 4.