Senior JCT sources, while confirming the decision to nix the independent valuation of the division, attributed the move to Polysindo's failure to bring in any money in the country after the deal was signed over six months ago. There were also differences between the two firms over asset-valuation, they said.

Sources said JCT would not sell the synthetic-fibre business for less than Rs 504 crore, the original valuation. However, Polysindo is not willing to shell out more than Rs 406 crore.

JCT has also been uncomfortable with the deal owing to Polysindo's reluctance to bring in Rs 100 crore via an escrow account. Financial institutions and banks had advised JCT that it should ask Polysindo to bring in the amount via an Escrow account as proof of the Indonesian firm's commitment to thedeal.

Polysindo, however, clarified its position, stating that the company will bring in the money as soon as JCT received the no-objection certificate (NoC) for the planned takeover. Even though FIs were believed to be willing to issue the NoC, the consortium of banks decided otherwise. The decision followed the revision of the sell-out deal in which Polysindo reduced the liability it proposed to take with the banks by Rs 32 crore. This amount, along with Rs 18 crore, which was to go on to JCT's books according to the original deal, was adjusted to increase the term-loans' amount to Rs 176 crore from Rs 126 crore. Sources further said JCT was wary as Polysindo was virtually running the JCT's synthetics division from October last without bringing in any money.

On Polysindo's claim of an investment of approximately Rs 35 crore in JCT's synthetics division, JCT sources said Polysindo, so far, had a conversion agreement and just held a letter of credit for $8.5 million guaranteed by HongKong Bank.

Theproposed deal between JCT and Polysindo earlier underwent two revisions. Initially, the valuation of the asset came down to Rs 413 crore as Polysindo put in Rs 90 crore as working capital in the synthetic-fibre division. The final estimation of the division by Polysindo, however, was further reduced to Rs 395 crore owing to non-realisation of current assets. According to JCT, the last valuation by Polysindo was not viable especially as the Indonesian firm said it would be open to fresh negotiations only after the third-party valuation.

With the deal likely to be called off, JCT's plans for financial revamp may be seriously affected. The company has already accrued a cumulative liability of over Rs 650 crore and bearing an annual interest burden of over Rs 200 crore.

Further, the company is expected to record a loss of around Rs 130 crore for the financial year 1997-98 out of which the major part will be on account of its synthetic-fibre division. In the first six months of the last fiscal, JCT hadrecorded a loss of Rs 63 crore of which Rs 59 crore came from the synthetic-fibre division. The company's proposed ECB plans worth $47 million is awaiting guarantee from IFCI, which was to replace part of JCT's high-cost rupee-loan. As an alternative to its synthetic-division deal, JCT is considering the sale of its steel division. But with the country's steel sector facing a slump, the company may find it difficult to find a buyer.