Court bottles up Pure Drinks
M&M projects 2% growth in tractors
Colgate foams up strategy to counter Lever
SAIL initiates legal action against truant custome
Titagarh Ind to raise Rs 90 cr through equity plac
Bill moots omnibus power houses

 
 
COURT BOTTLES UP PURE DRINKS 
 
 
FROM CHAITALI CHAKRAVARTY
 
New Delhi, June 4 
Groaning under a mountain of debt and stalked by creditors, Pure Drinks’ fortunes have taken a turn for the worse with the Punjab and Haryana high court asking the company to sell off two properties in Ludhiana and Delhi.

The cash-strapped company — makers of the Campa range of soft drinks — owes more than Rs 100 crore to its creditors, and the court’s order is aimed at ferreting out some of that money.

According to the order, if the amount raised from the auction of the two properties is insufficient to repay numerous creditors, the company will have to be wound up. More important, all this will have to be completed in 45 days.

The properties identified are a plot in Ludhiana, which has a bottling plant and other facilities, and another in Nazafgarh. Their sale is expected to fetch the company no more than Rs 10 crore, raising fears that closure might be imminent.

The property sale is the first in a series of selloffs that may be necessary to pay off scores of creditors who sought court intervention after Delhi-based cola-maker was wracked by internecine squabbles even as it struggled to hold on to its market share in the presence of stronger competitors.

The Singh brothers had appointed S B Billimoria & Co and Bansi S Mehta & Co to restructure the loss-laden company.

The decision followed an understanding signed between the owners of Pure Drinks — Satwant Singh, Ajit Singh and their aunt, Harjeet Kaur, in August last year.

Under the agreement, the company was supposed to appoint a consultant who would identify the assets and businesses which are viable, and those which could be put on the block. Pure Drinks has idle assets in Calcutta, Chennai and Mumbai, and they are estimated to be worth Rs 300 crore.

The faction-ridden company had weathered the onslaught of Pepsi and Coke initially but later, as the promoters’ squabbles and competition intensified, it slipped into the red. In 1998-99, it suffered a net loss of more than Rs 5 crore. The troubles became bigger, as did the losses in 1999-2000.

“We want to sell off Pure Drinks’ properties in a phased manner. This will include, among other things, bottling plants in Calcutta and Mumbai, and some prime property in Chennai. But first, we intend to wipe out our liabilities and infuse funds into the company,” Ajit Singh had said earlier.

The Calcutta has a bottling capacity of 220 bottles per minute while the one in Mumbai plant can turn out 600 bottles in the same time.

Both rolled down their shutters five years ago after acute labour problems, which broke out after some workers were laid off, made it difficult to run them.

The retrenchments were the company’s response to a sharp decline in Campa’s sales after it lost out to Parle’s Thumbs Up and Limca in a bruising cola skirmish.

The problem was that the faltering company decided to lay off employees to tide over the decline in sales, but could not rustle up enough funds to give them adequate compensation. Not being able to manage anymore, the Singh family had to close down the plant.

Problems increased last year when a Supreme Court order on phasing out 15-year-old commercial vehicles threw the company’s distribution network in disarray.

Forty of the 100 vehicles used for deliveries were forced to go off the roads immediately.

Added to this was another labour unrest, which led to the dismissal of 22 workers at the plant in the capital.

Poor finances have never allowed the company to indulge in marketing gimmicks — something that is de rigeur for other cola companies today — and that has meant sales losses, even though there can be no precise figures to back it.

The Campa range of soft drinks had recorded a 45 per cent increase in sales in 1995-96 but could only manage to break even in 1997-98, an indication of how Pure Drinks lost its way over the years.

That the conflict between the Singh brothers is still raging is telling evidence of the company’s poor shape, and its failure to overcome problems.

The siblings do not see eye to eye on the company’s financial matters. While Satwant says the money raised from selling off the properties identified by the Punjab and Haryana High Court will be inadequate to repay creditors and that the company may have to be wound up, Ajit thinks otherwise.    


 
 
M&M PROJECTS 2% GROWTH IN TRACTORS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, June 4 
Mahindra & Mahindra Ltd (M&M) has projected a growth of over two per cent in the tractor industry for the current fiscal. This is slightly above last year’s projections.

The two to three per cent rise in sales volume expected by the company comes close on the heels of M&M’s tractor sales taking a hit last year due to the drought conditions in five states. Coupled with this the banks tightened the lending norms to the farming community as they were conducting year-end audits.

Disappointed auto analysts however, aver that notwithstanding the sharp decline in volume sales during the month of April, M&M would find it tough to meet its target set for the year. “Last year, the company had recorded a growth of 1.74 per cent in tractor sales. This year’s growth is likely to be similar,” an analyst said.

While M&M presently has a market share of over 29 per cent in the retail tractor segment, it has laid out a blueprint to be the largest tractor manufacturer in the world by 2005 in terms of volume.The company is also looking at enhancing the retail spare parts business.

In the utility vehicle segment, too, analysts are sceptical about the company’s projection of growing close to 10 per cent in terms of sales volume.    


 
 
COLGATE FOAMS UP STRATEGY TO COUNTER LEVER 
 
 
FROM VIVEK NAIR
 
Mumbai, June 4 
The oral care major Colgate Palmolive (India) Ltd (CPIL) is contemplating distribution alliances with “non-competing FMCG companies” as part of its new strategy of concentrating on rural markets and meeting the challenge posed by Hindustan Lever.

CPIL has listed coverage expansion with the rural markets as the key area for achieving its vision of being the “Innovative Leader with our brands every day in every home”.

In a presentation to analysts recently, the company had said that the rural markets would be the key thrust area for delivering volumes and gaining competitive advantage.

Sources close to CPIL said that the company, has targeted around 60,000 villages under its direct coverage this year.

While the main idea is to look at villages with population of more than 2000, CPIL is planning to set up dedicated rural sales organisation in key states apart from increasing the depth of coverage in such areas by extending distribution in downscale urban areas/paan shops and kiosks.

FMCG analysts stated that CPIL’s strategy of focusing on the rural markets apart from looking around for distribution alliances was not surprising considering the challenge posed by Lever in many of its product portfolios.

“Colgate might prefer to go in for an alliance with say companies like Henkel Spic. Obviously the idea is to take on a common rival, HLL,” an analyst with a foreign brokerage averred.

Early this week, the company had surprised observers when it recorded a 22.74 per cent rise in net profits to Rs 52 crore for the year ended March 31, 2000. While its sales for the year rose to Rs 1,121 crore, it maintained the robust unit volume growth.

Continual cost cutting measures contributed significantly to the full year performance.

CPIL, which is a $ 9.1 billion company, has interests in five core categories comprising oral care, personal care, household surface care, fabric care and pet nutrition.    


 
 
SAIL INITIATES LEGAL ACTION AGAINST TRUANT CUSTOME 
 
 
BY A STAFF REPORTER
 
Calcutta, June 4 
The Steel Authority of India Ltd (SAIL) has initiated legal proceedings against some of its major customers for payment defaults amounting to around Rs 35 crore. These companies include Essar Projects Ltd and Steel Tubes of India (STI).

SAIL sources said the company had filed criminal suits against the directors of the defaulting companies. “Even though such defaulters account for a small percentage of SAIL’s customer base, the move to file such petitions stems from the need to check the trend of nonpayment of dues,” sources said. Among the largest defaulters is the Steel Tubes of India (Rs 13 crore) against which SAIL has filed a petition in Madhya Pradesh High Court.

Sources said the STI purchased hot rolled and cold rolled coils from the SAIL in 1998-99 on unsecured credit. With the company failing to honour its commitment to pay in time, followed by dishonour of its cheques, SAIL has been compelled to file suit under section 138 of Negotiable Instrument Act, they added.

SAIL has also filed winding up petitions under section 433, 434 and 439 of the Companies Act.

SAIL has filed a similar petition against Essar Projects in the Madras high court for the non-payment of dues worth Rs 6.6 crore.

The other major defaulting companies are Atma Steel Ltd (Rs 3.75 crore), Atma Tube Products Ltd (Rs 2.75 crore), BDS Steel (Rs 3.1 crore), Gujarat Steel Tubes (Rs 5.96 crore), Kalashpati Steel Industries Ltd and Jain Tubes.

While SAIL firms up legal action to recover the losses, the company has reported a loss of Rs 1,720 crore for the financial year, 1999-2000.

The company claimed its bottomline was primarily affected by adverse market conditions during the first three quarters of 1999-2000l. Average price realisations remained unchanged with the domestic market giving a growth of three per cent and export realisation recording a fall.

SAIL had also spent around Rs 585.55 crore extra towards a golden handshake scheme for some 13,500 workers and ad-hoc payouts to workers pending a wage settlement.    


 
 
TITAGARH IND TO RAISE RS 90 CR THROUGH EQUITY PLAC 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, June 4 
The Titagarh Industries Ltd (TIL) has decided to raise equity-linked funds worth Rs 90 crore through private placement route in order to revive its two ailing paper mills.

Sources said the decision had been taken after the financial institutions (FIs) had asked the company to bring the equity immediately, which was needed to start operations in the two mills.Both the paper mills have been closed for the past 11 months.

The company, promoted by J. P. Choudhary, has initiated negotiations with “a couple of” multinational paper majors and is hopeful to clinch the deal within a short time. FIs, including, IDBI, IFCI and ICICI, had extended loans worth Rs 160 crore to TIL to part finance the Rs 275 crore revival project of the Titagurh Paper Mills (TPM). BIFR approved the loans in 1995-96.While TIL injected Rs 20 crore into the company from internal generation, a sum of Rs 90 crore was intended to be raised through a public issue. But with the depressed state of the capital market, TIL could not raise the fund and the interest on the borrowings were getting accumulated sharply.

A senior TIL official said the interest accumulation has gone up to over 50 per cent of the total borrowings. “We are now desperately looking for a foreign company to fund the equity so that we can start operations,” the official said.

The TPM has a capacity of producing 77,000 tonnes of writing, printing, security and bond papers per annum. Earlier, the company had planned to sale the second mill. It had appointed Ernst & Young to find a buyer.It had also planned to use the sales proceeds for modernising the first mill.

However, with the paper industry witnessing growth since early this year, TIL shelved the plan to sale the mill and instead looked for reviving the same.

The official further pointed out that after the deal is clinched, the company would be able to reopen the mills within a year.    


 
 
BILL MOOTS OMNIBUS POWER HOUSES 
 
 
BY RENU M R KAKKAR
 
Calcutta, June 4 
The fourth draft of the Electricity Bill 2000 now being framed allows companies to combine the functions of generation, distribution and supply, setting up ‘merchant’ power stations, but says there should be no trading in low-cost power.

The National Council of Applied Economic Research (NCAER), the agency drawing up the legislation, made a series of amendments which have effectively diluted the original document. A fifth draft, along similar lines, is now believed to be in the works.

The fourth draft enables states to determine their own pace and priorities for power reforms within a broad framework. They have been given a year to restructure their electricity boards, but the process can continue for a longer time.

The current draft proposes to retain the Electricity Reforms Acts of seven states on the condition that provisions of this Bill shall be effective across the country in respect of supply and transmission. These states are Orissa, Haryana, Andhra Pradesh , Uttar Pradesh , Karnataka and Rajasthan.

The draft Bill, however, prohibits a transmission company (Transco) from entering into generation and distribution. However, no such restrictions have been placed on other entities.

According to the Bill, companies will be required to separate their operations, accounts and tariffs for each functional area. A distribution company, for example, will be required to maintain separate accounts and tariffs for wheeling so that there is competition in its supply business.

Trading in electricity has been recognised as a distinct function. This would not only enable better allocation and utilisation of capacities, says the draft, but also encourage market-based operations leading to setting up of ‘merchant power stations’.

The Bill envisages a spot market for bulk power to facilitate efficient, competitive and orderly trading. This trading must thus begin in surplus regions , including off-peak surplus regions, and gradually extend to other areas. To protect consumer interests, the draft seeks to keep low-cost power out of the trading pool.

It says that the setting up and operations of new generating stations would be governed by market forces.

Licensing of new generating stations has been simplified and will be subject to system requirements. They would have the freedom to generate and supply in a competitive environment in a manner which works to the advantage of consumers.

The key roles of central and state transmission utilities have been retained so that they can spearhead development of transmission systems, apart from facilitating private investment.

The transmission highways are to be kept open. This means companies cannot have any financial interest in generation, distribution or supply.    

 

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