Turnaround and Transformation of Two Central PSUs

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In implementation of policies of the Government, Bureau of Reconstruction of Public Sector Enterprise(BRPSE)  has been endeavouring since its establishment in 2004, to revive sick CPSEs.  BRPSE already declared 11 CPSEs as Turnaround CPSEs after those companies had posted profit continuously for three years.  Now two more CPSEs have joined the stories of turnaround and transformations.

            Hindustan Prefab Ltd. with an accumulated loss of Rs. 138.2 crore as on March 31, 2006 have posted profit continuously for last three years with positive networth of Rs. 10.14 crore as on March 31, 2011.

            Andrew Yule & Co. Ltd. which incurred a loss of Rs. 89.57 crore in 2006-07 have posted a profit continuously for last four years with positive networth of Rs. 96.52 crore as on March 31, 2011.

Hindustan Prefab Limited

Hindustan Prefab Limited was established in 1948-49 to provide quick housing solution to the people who had  migrated from Pakistan.  It is a CPSE under Ministry of Housing & Urban Poverty Alleviation.  It had accumulated losses of Rs. 138.20 and Net worth was (-) Rs. 132.49 crores till 2007-08.  The production in the factory was at standstill since September, 2004.  The operations of the company were limited to Delhi and surrounding areas.  Salary was paid out of Budgetary support of the Government. The employees of the company were demoralized because of the uncertainty about their future.  Industrial relations were very strained.  Pay scales of employees had not been revised beyond 1992.

On 20 August 2009, the Union Cabinet approved Financial restructuring of the company by converting the outstanding loans and interest amounting to Rs. 128 crore into equity with effect from 01 April, 2008 without any cash infusion – upon the recommendations of Bureau of Reconstruction of Public Sector Enterprise(BRPSE).

Various measures were undertaken to secure work orders to improve turnover, address employees grievances and motivate them to move to the project sites, re-deploy idle workers, hire manpower on contract basis, etc.  Meetings were held with the employees to infuse confidence in them and to demonstrate that the present management meant business.  The team of employees is now geared up to take-up any challenge.  The latest pay scales have been implemented in the company from 01 April, 2009.    This has generated full confidence of employees in Management.

The order book of the company as on date is more than Rs. 2000 crore.  Recently a  Sewage & Drainage Project has been awarded to the Company by the Government of Mizoram valuing Rs. 450  crores.  In addition, there are large orders from Food Corporation of India,  Assam Rifles, besides many others.

The Company has now crossed the national boundaries and has started housing projects for the ‘Internally Displaced Persons’ in Sri Lanka.  HPL is also instrumental in completing the construction of 450 Prefab houses for the people affected by the cloudburst of August 2010 at Leh-Ladakh (J&K) in a record time  of 85 days under Corporate Social Responsibility funds from other CPSE’s.  For this rare feat, even the Prime Minister had conveyed appreciation through the Minister of Housing and Urban Poverty Alleviation for this achievement.

Pre & Post revival performance of the company is given below:-

Rs. in crores

Particulars        Pre-revival performance     Post revival performance
Year2005-062006-072007-082008-092009-102010-11
Turnover

8.72

23.20

35.10

150.32

162.42

203.07

PAT

-13.82

-14.64

-13.75

7.75

2.47

4.61

Networth

(-) 105.34

(-) 118.74

(-) 132.49

3.06

5.53

10.14

HPL has decided to restart its core prefab business  at its own and to continue its present activity of project management services.  For this purpose, it has also signed an MOU with SAIL and techno economical feasibility report has been received.    Process for starting this activity is at advanced stage.

Andrew Yule & Co. Ltd.

Andrew Yule & Co. Ltd., one of the pre-independent companies of the flagship Andrew Yule Group, started its business as a managing agency.  It became  a Government company in 1979 when the Government acquired stakes in it.  It is under the administrative control of Department of Heavy Industry and the Government holds 93.14%  Equity Shares of the Company while the balance is held by public at large.  The Company’s shares are listed in Stock Exchanges.

It is a conglomerate of diversified products/business.  It has mainly three divisions, viz. Tea Division which produces CTC and Orthodox Tea, Electrical Divison which produces various electrical instruments such as HT&LT switchgears, transformers, etc. and Engineering Divison which produces industrial fans, air pollution control products, effluent & water treatment plants, etc.  The Engineering division is located at Kalyani, West Bengal, the units of Electrical Division located in Kolkata and Chennai and the Tea Gardens are located in West Bengal and Assam.

In spite of having a span of over 150 years of glorious business history, the fortunes had not improved and it became a sick company with the erosion of networth in 2001-02 and was referred to BIFR.   In spite of the revival  package sanctioned to it in 2003 by the Government it could not  turnaround.  The main reasons for continued sickness were decline in bulk tea prices and  exports, increase in cost of inputs, high debtors from State Electricity Board, failure to up-grade electrical products and revalidate text certificates of electrical products due to lack of funds, working capital problems, inability to participate in tenders due to want of bank guarantee, surplus manpower, reluctance of banks to provide need based working capital, inoperative/frozen cash credit accounts, inadequate investment/modernization, lack of vendors’ confidence, limited product diversification.

The Company was referred to BRPSE in 2006.  The Board took the holistic view of the operations of the company and recommended a revival strategy encompassing:

  • Business restructuring by hiving off of electrical and engineering divisions into two separate subsidiary companies intended to grow the business independently and capture the growing opportunities in electrical and engineering sector.
  • Group restructuring by disinvestment of AYCL shareholding in group companies – TWOL, PYL and DPSC and ploughing back of the receipts for revival of it.
  • Financial restructuring through cleaning up of balance sheet to improve market credibility and nurture the company back to health, and fresh infusion of funds for working capital, CAPEX, discharging liabilities, provision of bank guaranty, etc.
  • Rationalising manpower to improve bottom line and entering into packed tea business, a growing tea segment, to improve profitability.
  • Explore the possibility of JV between Yule Engineering Ltd. with BHEL after its restructuring in order to have a sustainable revival.

The Government approved a revival package in February, 2007 consisting of:

Creation of Subsidiaries– To hive off the electrical & engineering divisions of AYCL  into two separate subsidiary companies, namely Yule Engineering Ltd. and Yule Electrical Ltd.

Infusion of Funds – To infuse Rs. 87.06 crore by the Government by way of equity and to provide Rs. 29.56 crore as plan fund.

Waivers – To waive/conversion of loans, interest on loans etc. amounting to Rs. 45,.17 crore.

Government Guarantee – Government to give guarantee for R. 111.96 crore

Disinvestment of Subsidiary Companies – To allow AYCL to disinvest and offload all shares held by them in (a) Tide Water Oil Co.(India) Ltd.(TOWL), (b) Phoenix Yule Ltd. (PYL) and (c) Dishergarh Supply Co. Ltd. (DPSC and to plough back Rs. 76.21 crores being the estimated sale proceeds from the same to fund restructuring requirements.  To allow AYCL to disinvest 100% of its equity in Yule Engineering & Yule Electrical Ltd. formed out of the Engineering and Electrical division.

The enablement brought a new hope.  A combined effort of Management, employees and all stakeholders – which enabled the Company to achieve the turnaround in the first year and reposition itself for further  growth.  The Company took special initiative to re-build the trust and confidence amongst the employees and to inject motivation and teamwork, which resulted in improvement in the productivity and performance.  Concerted efforts were  made to reduce cycle time and honour delivery schedules.  Special efforts were made in inventory management and debtors management.

Highlights

  • Company was able to restore confidence of bankers and was able to get relief & concessions from banks with which the balance sheet was restructured and the company regained its financial health and credibility.  Company was able to obtain reduction in the rate of interest.
  • Company successfully disinvested in Group companies – PYL, DPSC and paid back to the Government the loan sanctioned in the revival proposal.
  • Close interactions with the customers and suppliers also helped the Company to re-establish its relations with them.
  • Settlement of various impending issues of the Unions reposed their confidence on the Management and peaceful and harmonious industrial relations in all the operating units were maintained, reinforced the training and  development activities of the employees to enhance the value of human assets.
  • One of the jewels in the crown of the Andrew Yule Group is Tide Water Oil Co.(India) Ltd. which operates in highly competitive lubricant market and targeted to reach Annual Turnover to Rs. 1000 crore.  The Company acquired 100% shares of VEEDOL International Ltd. from Castrol Ltd. and Lubricant U.K. Ltd.
  • The company has been honoured with the SCOPE Excellence Award in 2007 for the turnaround category.

The company started making profit from 2007-08.  Networth  turn positive in 2008-09.

 Pre-revival performancePost revival performance
 2004-052005-062006-072007-082008-092009-102010-11
       (Prov.)
Gross Turnover123.77118.39144.95182.71189.79190.39249.91
Net profit-75.44-74.07-89.575.3329.3675.3841.32

The Company is presently exploring the business tie-ups for new products and businesses such as Air Separation Business, Small Wind Turbine:  Solar Hybrid Business (SWT Project), Enhancement of Capacity and Rating of Transformer Production and Exploring to tie-up with HEAG China for Technology Transfer Manufacture higher rating of Circuit Breakers – 40 KA etc.

The Company has always been conscious of its social responsibility and has been contributing to the social causes at its Tea Gardens for more than 25 years, even before Corporate Social Responsibility (CSR) came into focus.  The various CSR Activities undertaken by the Company as under:  providing land for construction and running “anganwadi Schools, Started Night School, conducting malaria prevention camp and HIV/AIDS Awareness Camp, providing drinking  water facilities to schools run by Panchayat, vocational programme for young men.

The Company made a turnaround story, reinforced the self confidence amongst the employees and it has ushered a new hope that the Company will regain its past glory.

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