Hindustan Insecticides Ltd (HIL), a central PSU operating in the areas of public health care and crop protection, was referred to the BIFR in 2003 as a sick company. It had been making losses for prior nine years, which led to total erosion of its networth. The PSU was later revived in 2005 under a plan mandated by the BRPSE. The company sprang to profit in the very first year of its revival and there has been no looking back for it since then. HIL chairman and managing director, K Harikumar, discusses with FE?s
Noor Mohammad the company?s future business plans: Excerpts:
How much losses had HIL suffered before it was revived in 2005?
The company?s accumulated losses stood at R130 crore as on March 31, 2005. Its negative networth had dipped to R84.17 crore.
What were the main factors responsible for the company?s losses?
One of the main reasons was that the company was not getting a reasonable return on the DDT supplied to ministries. HIL was entitled to a 16% return on capital employed. However, the value of its fixed assets had depreciated substantially while it had to pay interest to banks on loans taken to meet its working capital requirement. Money spent by the company to run its operations was not taken into account for calculating return. Since DDT accounted for 50% of the company?s revenue, its business could not have been profitable.
Interest payment on bank loans taken by the company in the past was a huge financial burden on it. HIL had to pay about R14-15 a year on this account.
We had to close our factory in Motinagar, Delhi, following the Supreme Court?s order in 1996. But the company was required to pay salary to its staff during closure. The factory remained closed for six years and the total amount paid in salary to employees of the factory worked out to R47 crore. The company has shifted the factory to Bhatinda.
How has been HIL?s financial performance post-revival?
We are consistently making profits from the year 2005-06. Our turnover has increased by more than four times. Our cumulative losses have come down to R10.55 crore and networth has gone up to R83.5 crore.
The company achieved a record turnover of R243 crore in the financial year 2009-10. Its net profit for the year was R3.06 crore, compared to R2.71 crore during the previous fiscal.
Out of the 36 PSUs that had gone restructuring following recommendations by the Board for Reconstruction of Public Sector Enterprise (BRPSE), only eleven have posted profits for three consecutive years. HIL is one of them. We have bagged the BRPSE Turnaround Award 2010.
How is your DDT business doing?
We are fully meeting the DDT requirement of the government of India. At the time same, we have also sharpened our export focus, especially in Africa We are already exporting DDT to some African countries and exploring more markets. We exported DDT worth R14 crore in the financial year 2009-10.
What are HIL?s future growth plans?
We are planning to grow into crop protection business and making huge investment in ramping up manufacturing capacity. We plan to come out with 6-7 products next year.
We are also investing in building our marketing network in partnership with others and also on our own. We have forged marketing tie-ups with Rashtriya Chemicals and Fertilisers, National Fertilisers and Kribhco in different regions. We are also looking to forge similar partnerships with state government agencies. We plan to become a R500 crore company in next two years, that is, by the end of the financial 2014-15.