HEC raises working capital against plant

Ailing public sector unit Heavy Engineering Corporation (HEC) at Ranchi, eimpowered with an order from the Jharkhand High Court has recently started negotiations with several commercial banks in the state capital to hypothecate its plant and machinery to meet its deficit working capital for execution of work orders to the tune of several hundred crore for which agreements had been signed for time bound delivery.

HEC was forced to do it owing to apathetic attitude of the Jharkhand government in releasing its sanctioned funds towards the sale of some HEC land and lease of several hundred quarters and buildings of the company.

At present HEC had orders in hand worth Rs 550 crore and before the closure of the ongoing financial year, the company was expected to receive additional work orders worth Rs 700 crore.

HEC was referred to the Board for Industrial and Financial Reconstruction (BIFR) in February, 1992 as the company's accumulated loss of Rs 1008 crore had eroded its paid-up capital.

The revival plan envisaged the cut-off date at March 31, 1995, but was actually sanctioned by BIFR in August, 1996 and approved by the Centre in February, 1997.

The sanction of the revival plan by the Centre took nearly 10 years and did not lead to any action or any steps for implementation of the recommendations of BIFR, resulting in deterioration of the health of the ailing PSU over the years.

Then, on July 14, 2004, the HEC management received an order from the BIFR to wind up the company.

Immediately after receiving the closure order from the BIFR, HEC management challenged the order of the BIFR before the Jharkhand High Court.

Since then the High Court had been passing orders from time to time on the state and the Centre to assist the revival of the company under several packages.

HEC was the main player behind the establishment of Bokaro, Rourkela and Bhilai steel plants of Sail. HEC reported remarkable performance in the calendar year 2007 both in productivity and profitability terms.

In 2006-07 the company made a net profit of Rs 2.86 crore after a gap of 18 years.

It expected to increase the net profit to Rs 10 crore in 2007-08.

Company sources claimed that the PSU has already surpassed its annual MoU target for 2007-08. The gross sales of the company till February on the ongoing financial year was Rs 372.93 crore which was 12 per cent higher than the target up to February, 2008 of Rs 332.07 crore.

The achievement in turnover up to February of the current financial year was also 48 per cent higher than the previous fiscal (2006-07). The management expected that the turnover in the current financial year would cross Rs 400 crore against the set target of Rs 360 crore, creating another milestone in the history of HEC. HEC recently signed a long-term MoU with Sail for supply of torpedo ladle cars, transfer cars, slab dispatch cars, rolls, EOT cranes, machine tools and mechanical equipments required by Sail for its plant modernization process.

The supply of diverse equipment to Sail plants was expected to fetch Rs 3500 crore in the coming years to HEC.

Despite suffering from a funds crunch, HEC has been paying the salaries to its employees regularly.

The management claimed that HEC would become a positive net worth company by May this year after two decades from the current negative net worth of Rs 700 crore as of last financial year 2006-007.