Bengal Chemicals posts profit after 63 years

Cutting procurement costs, blocking financial leakages helped it post Rs 4 crore gain

After 63 years, Bengal Chemicals and Pharmaceuticals (BCPL) has posted an annual profit, of Rs 4 crore, in the financial year 2016-17 (FY17).

In 1977, the Union government took over the management of the company, founded by chemist and entrepreneur P C Ray in 1901. It was nationalised in 1981.

In FY17, the company earned Rs 111 crore, about two per cent less than what it earned in 2015-16. But, it made a profit, compared to a loss of Rs 9 crore FY16.

A senior company official said the company achieved a gross margin of Rs 23 crore in the last financial year. This improved its financial position by a little more than Rs 43 crore.

BPCL director of finance, P M Chandraiah, who holds additional charge as managing director, said reduction in procurement costs and stoppage in financial leakages were instrumental in turning the company around.

Direct cost of gross sales reduced to 48 per cent in FY17, against 59 per cent the previous year.

After BCPL posted a dismal revenue of Rs 17.07 crore in 2013-14, down 38 per cent from 2012-13, and a gross loss of Rs 36.55 crore, things started looking up the next year.

In 2014-15, the company’s revenue jumped 169 per cent to Rs 45.84 crore, and escalated to Rs 88.19 crore in 2015-16. The loss also narrowed from Rs 17.32 crore in 2014-15 to Rs 9.13 crore in 2015-16.

“However, it was important to emerge as a profitable venture and I knew that once a slew of measures are implemented, we can post a profit,” Chandraiah told Business Standard.

Joining the company in 2014, Chandraiah tightened managerial grip. He also rationalised the cost structure of the company. Procurement, accounts, sales collection, bill processing, inventory and payroll systems were centralised, leading to improvement in the reporting numbers.

“With a centralised system, we now have exact knowledge. This was missing previously,” he said.

Chandraiah also introduced financial and labour discipline. In the recent past, BCPL has opened more than 200 salary accounts to encourage workers to use electronic payment. It has also introduced biometric attendance system, besides putting an annual appraisal process in place.

It also closed more than 30 dormant bank accounts. About Rs 2 crore, which was previously kept in the firm’s current accounts, has been reduced to just Rs 25,000, ensuring money isn’t kept idle.

By 2020, BCPL expects to post a Rs 200-crore revenue and a profit of Rs 20 crore.

Showing the first signs of staging a comeback, BCPL, long thought to be beyond financial repair, posted a Rs 1.16-crore profit in the first half of the 2016-17. Although the company has started staging a turnaround, its accumulated losses stand at Rs 262 crore and the net worth is at a negative Rs 184.6 crore.

After founder Ray’s death in 1944, the BCPL slowly turned into a loss-making company in the early 1950s, due to continuous losses and labour problems.