Sitting in his Lodhi Road office, National Textiles Corporation (NTC) Chairman and Managing Director K Ramachandran Pillai cannot resist the temptation of pulling out yarn from a fresh consignment of samples that has just reached Delhi.
The latest lot is from the newly-built mill in Achalpur, Maharashtra, where a trial run is underway. The composite mill is one of the three new units, the others being in Hasan and Ahmedabad. “This is the first time that new mills are being set up by NTC. We always had legacy mills,” says Pillai.
He cannot stop talking about the many firsts that the company has achieved in nearly two decades: starting from posting operating profits — that, too, without government support — to resumption of hiring and plans to launch a new brand. “For the first time in 42 years, we have spent money, Rs 500 crore, on modernisation,” adds the NTC chief as he asks his staff to show samples of the T-shirts, bed linen and saris that the company is selling.
The new initiatives are the result of the sale of real estate in prime locations in Mumbai and other parts of the country. Thanks to the sale of 110 properties, comprising mill land, NTC has managed to garner Rs 4,100 crore between 2005 and 2009. Earlier this year, it raised another Rs 1,979 crore from the sale of two properties in Mumbai. There are 48 more to go, covering some 1,000 acres, which the company is hoping will help it fetch Rs 6,000 crore, if not more.
The bulk of the money is going to come from 55 acres spread across six properties in Mumbai. “We will wait for two or three months before we go with the next round of auctions. After all, the market also needs time to generate liquidity,” says Pillai. But the company has started work on tweaking the sale process and has decided to submit an integrated development plan for the mills to the municipal authorities in Mumbai.
Pillain says more than selling land, the real challenge was in convincing lenders and other stakeholders to ensure that the process went through. After all, plans to raise resources had fallen flat on two occasions in the past and in the third attempt, it was only after a Supreme Court order that NTC could sell real estate to fund its revival.
While the government converted Rs 2,500 crore of its debt to the company into equity, another Rs 2,500 crore in dues was waived. The company, which comprised nine subsidiaries, was restructured into one entity. A voluntary retirement scheme for over 62,000 employees was implemented and the dues of nearly Rs 1,200 crore to lenders, provident fund and employee insurance were cleared.
The plan is to use resources from the sale of properties belonging to 77 mills out of the 119 to revive 40 mills. Two mills were transferred to the Pondicherry government. In the case of the 40, 24 were to be revived directly by the public sector company, while the rest were to be done through joint ventures.
| THE NTC MATH Revenue Land sale (2005-2009): Rs 4,100 cr Land sale (so far in 2010): Rs 1,979 cr To generate from remaining properties: Rs 6,000 cr Expenditure VRS: Rs 2,300 cr One-time settlement with banks, provident fund payment, etc: Rs 1,200 cr Modernisation spending: Rs 500 cr New plants in Achalpur, Hasan, Ahmedabad: Rs 700 cr Technical textiles units in Rajasthan, Tamil Nadu: Rs 500 cr Fresh modernisation plans: Rs 1,000 cr |
While NTC roped in Pantaloon, Alok Industries and Bhaskar Industries for five mills, it is yet to find partners for the remaining 11. “The experience has not been very encouraging, so the board is reviewing the arrangement. Most likely, this system will not continue as we have not been able to find partners,” says Pillai.
The modernisation and revamp programme, finalised in 2000, is also expected to be tweaked to factor in the developments that have taken place in the last 10 years. For instance, technical textiles, comprising material used in diapers and for road construction, will play a big role and that is why two plans – in Rajasthan and Tamil Nadu are lined up to manufacture.
The target is to not just increase the turnover to Rs 2014 crore by 2014 which is over four times the sales of Rs 526 crore registered during the last financial year. Even the revenue mix is going to change with the dependence of yarn decreasing from 91 per cent last year to around half in 2014.
“This is a great story of revival. Today the company can run smoothly for the next 15 years,” says Pillai. Analysts, however, have a slightly different take. “The land sales are in the right direction, but NTC will have to do much more to ensure profitability of company. The machinery even in its modernised mills are 15 years old, marketing strategies are clichéd and the set-up needs more aggressive reforms and involvement of fresh blood,” says Prashant Aggarwal , joint managing director of management consultancy form Wazir Advisors.
