Voltas to shut down Hyderabad facility

New Delhi, Aug 4 | Updated: Aug 5 2005, 05:30am hrs
In a bid to reduce the drain on its profitability, Voltas Ltd has decided to close down its loss making Hyderabad facility latest by the end of December 2005. The company, however, plans to set up a new plant to manufacture commercial refrigerators and water coolers at Uttaranchal with an investment of Rs 15-20 crore.

The company also plans to set up another plant at Uttaranchal to manufacture 1 million air conditioners with an investment of about Rs 60 crore. The latter will be done through its joint venture with Fedders International. The former will be Voltas own investment.

Company sources said though 11.5 acres land in the hill state has been bought, the project has yet to be approved by the Board.

Voltas which used to contract manufacture refrigerators for LG, Samsung and Haier, at its Hyderabad unit, has stopped contract manufacturing since July 31, 2005.

Our objective is to close down the factory as we are incurring heavy losses. We are currently holding negotiations with the workers union, a senior company official told FE.

In The Cold Storage
Loss making unit to be closed by December
Two new facilities in Uttaranchal on cards
The first will be a Rs 15-20 crore
unit to manufacture commercial refrigerators & water coolers
The other will be a Rs 60 crore
JV to make 1 million air conditioners
In the past, Voltas had made several attempts to dispose off its refrigerator unit in Hyderabad which has been a drain on the companys profitability. According to analysts at IL&FS, under-utilisation of capacity coupled with high fixed cost (mainly labour) have led to excessive losses in the unit. The company has already offered one round of VRS to the 1,000 employees out of which only 250 have accepted in the last quarter, putting a charge of Rs 11.3 crore on the company during the quarter ended June 30, 2005.

One reason for such focus on tax free zone in Uttaranchal is that Voltas tax benefits have been withdrawn from its Dadri facility where it makes 2.5 lakh AC units annually. Capacity at Dadri is not sufficient, the company official said and added that the Dadri plant will continue to manufacture for the Western region. The company may, however, transfer some plant and machinery from Dadri plant to the proposed new facility.

ACs contribute about one-third of the total turnover of Voltas. The brand which was in 2001 dethroned from its leadership position by US major Carrier curretly is back as the No 2 player in the AC market.