Financial Daily from THE HINDU group of publications
Saturday, Jan 05, 2002
Industry & Economy
Lagan Jute: A divestment story with a happy ending?
KOLKATA, Jan. 4
LAGAN Jute Machinery Co Ltd and Modern Foods have been identified by the Department of Heavy Industries as the two successful cases where the Union Government has been able to divest its share of the equity and the companies have started registering profits.
Mr T. Nandakumar, Union Joint Secretary for Textiles, and Mr R.P. Singh, Chairman of Bharat Bhari Udyog Nigam Ltd, stated this at a jute seminar here on Friday.
The Union Government sold its 74 per cent stake in Lagan Jute to Murlidhar Ratanlal Exports Ltd in July 2000. Lagan Jute used to be a wholly-owned subsidiary of Bharat Bhari Udyog Nigam Ltd. Subsequently, the new management has been able to increase its production capacity to 86 machines from 60 machines per year.
As per the agreement, Murlidhar Ratanlal Exports will have to spend Rs 2.25 crore in research and development over the next five years, diversify into other machinery manufacturing processes and develop a market for spare parts.
Murlidhar Ratanlal Exports is also repaying Bharat Bhari's loan of Rs 35.56 lakh, which was extended by the Union Government in eight equal quarterly instalments.
According to the agreement, Murlidhar Ratanlal Exports bought 6,330 shares in Lagan Jute of face value of Rs 1,000 each at Rs 4,000 each to acquire a 74 per cent stake at Rs 2.53 crore. The Government, through Bharat Bhari, still holds 26 per cent stake in Lagan Jute.
In addition, the company subscribed to a fresh Lagan issue of Rs 1.5 crore and augmented its paid-up capital and share premium reserves.
Lagan Jute was originally set up in 1935 as James Mackie International Ltd. The company was nationalised in 1978 and made a subsidiary of Bharat Bhari in 1987. It has a workforce of 395, including 37 executives. The annual employee cost is placed at Rs 3.55 crore.
During 2000-2001, Lagan Jute's turnover was Rs 7.22 crore against Rs 6.32 crore in the previous year. Exports were to the tune of Rs 56.39 lakh against the previous year's Rs 27.38 lakh. Net loss was placed at Rs 45.02 lakh.
However, for the current financial year, the company is expected to register a net profit of over Rs 9 crore. Orders worth more than Rs 6 crore have already been booked.
Mr S.R. Dasgupta, Managing Director of Lagan Jute, said the company had started showing positive signs of growth. The salaries of the employees had not been changed
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