Time runs out for bleeding HMT

But chairman clueless about shutdown orders as fate of 1,105 employees hangs in the balance

The mood at corporate headquarters of HMT Watches is subdued as rumours of closure spread among its employees. Around 1,105 employees at the company’s three factories and corporate head office are a worried lot as they will no longer be “keeping time to the nation”.

 

The department of heavy industry under the Ministry of Heavy Industries and Public Enterprises is reported to have decided to wind down the company, 53 years after it started ticking. The manufacture of HMT, the once-iconic watch brand, will soon be stopped at Bangalore and Tumkur in Karnataka and Ranibag in Uttarakhand, which together have a 200-acre land parcel. Half of HMT’s workforce is in, Ranibag, while the rest is in Tumkur, Bangalore and other sales offices.

 

However, the company has not received any official communication from the government on its closure, a top official said.

 

“I have no official communication from the ministry on closure of the company. It was decided some time ago to downsize manpower from the present level of over 1,000. I have no information on shutting down the company,” S Girishkumar, chairman and managing director, HMT Limited. 

 

The decision to shutter the ailing company is likely after revival efforts initiated in 1999 failed. HMT Watches has been reporting losses for the last 15 years – current accumulated losses are in excess of Rs 1,500 crore – after it failed to resist the onslaught, first, of cheap quartz-driven watches and, later, by premium brands that were easily accessible to Indian consumers. 

 

For the year 2013-14, HMT Watches reported sales of Rs 7.48 crore and production of Rs 4.70 crore. Net losses stood at Rs 233.08 crore compared to Rs 242.47 crore in the previous year. A paucity of working capital, erosion of trade channels and high cost of borrowings, and an annual wage bill of Rs 35-40 crore, ensured that HMT would slowly bleed to death. 

 

“There was a proposal some time ago to offer Voluntary Retirement Scheme to employees as per the salary structure of 2007. If that is applied, each employee would get 2.5 times of his salary as the final settlement amount. However, we have no clue on how the government would compensate employees,” said a senior employee on condition of anonymity.

 

HMT Watches, a subsidiary of HMT Limited was established in 1961 at Bangalore. During the zenith of its operations in 1991-92, it had over 8,000 employees and reported its highest-ever sales of around Rs 300 crore. Starting 1994, however, it started its slide, and despite a restructuring in 1999, never recovered from red territory. In 1986, the company faced another major setback when about 350 of its best engineers left for Titan Watches, a Tata company and the new kid on the block with sleeker designs and aspirational value. 

 

It went on to cede both revenue and market share and iconic status to its younger, more visible competitor. A number of attempts were made to revive the ailing workhorse, a senior executive said on condition of anonymity, but that political interventions at every level, including appointment and promotion of employees and the company head, demoralized its employees and eventually affected its functioning. 

 

A recent revival plan for HMT Watches was awaiting government approval, but based on the recommendations of Board for Reconstruction of Public Sector Enterprises (BRPSE), the government seems to have instead decided to shut down the iconic firm that at its peak boasted of more than 400 watch models in its portfolio.