Pillai, who joined the HEC as chairman and managing director (CMD) a year back, admitted to Business Standard that the company's effort to secure loan from the banks by mortgaging plant and machinery had not succeeded.
He said all the banks were reluctant to grant loans to HEC as it still had a negative net worth.
The company's proposal for mortgaging of vacant land would be placed shortly before the board of directors of HEC, he said.
Pillai said in 2007-08, HEC achieved gross sales of Rs 416.28 crore, the highest since the inception of the company. Sales were 37 per cent higher than the corresponding period of 2006-07.The company also earned a net profit of Rs 3.46 crore in 2007-08.
The CMD said that profitability was severely eroded by the heavy interest burden of government loans.
"Had the land issue with the Jharkhand government been resolved and the company received the fund from the government of Jharkhand, profit in the financial year 2007-08 would have been Rs 23 crore, the highest ever in the history of HEC till now", he claimed.
The profit would have enabled the company to attain positive net worth.The CMD said that there was no dearth of orders for HEC services and goods. In the financial year 2007-08, HEC had received orders worth Rs 400 crore and as on date, the company had work orders in hand worth Rs 672 crore.
Pillai said that for want of working capital, the company had to off-load nearly 15 per cent of its work orders this year to some private sector enterprises in the country.This enabled HEC to make deliveries of products and services within the scheduled period to customers.
He said the system of off-loading work orders had helped HEC as besides working capital shortage, the company was suffering from a shortage of manpower to execute all the contracts it had bagged.
Its clients still trusted HEC despite the working capital crisis and these problems.The work contracts were being farmed out to a a number of private sector enterprises, he said.
Pillai predicted that in the coming years, the company would still have to off-load 35 per cent to 40 per cent of the contracts its bagged to private sector companies to execute them.
The CMD said that the company had also reduced its interest burden on loans taken from banks by paying off some parts of the loans due to financial institutions.
The salaries and statutory dues of its 3330 employees was being disbursed entirely from the funds generated through its own resources despite the many long years of losses that plagued the company in the past.
Pillai said that another cause of concern was the dwindling number of skilled technical manpower working for HEC.
The average age of the employees was 53 years and as almost no recruitment had been made during the last decade, the pool of technical manpower was slowly dwindling and a shortage was becoming a problem.
The CMD admitted that the plant and machinery were very old and many of machinery lines had not been reconditioned or upgraded for a long time resulting in poor mechanical efficiency and output from the plant. HEC was very short of funds and this lack of funds was the only reason why machinery lines had not been upgraded or reconditioned.
To sustain the growth of HEC, such investments in the factory were essential and these would be taken up on a priority basis, he said.
