Financial Daily from THE HINDU group of publications
Wednesday, Mar 20, 2002
BIFR to hear Jessop on April 30
NEW DELHI, March 19
THE revival of the sick public enterprise, Jessop & Company Ltd, is now in the hands of the Board of Industrial & Financial Reconstruction (BIFR), which is slated to hear the case on April 30.
The Union Government had submitted a total package for reviving Jessop through the induction of a strategic partner, besides giving a fund and non-fund support to the company worth Rs 203.82 crore, Government sources said. The Cabinet Committee on Disinvestment (CCD) had selected Kolkata-based Ruia Cotex Ltd as the strategic partner for acquiring a controlling stake of 72 per cent in Jessop for a consideration of Rs 18.18 crore.
The Government also decided to provide a non-fund support to Jessop involving conversion of Government loans into equity and writing off/waiver of penal interest, which would translate into an amount of Rs 140.82 crore. Further, financial support of Rs 63 crore would be extended to Jessop for meeting the liabilities of banks on a concessional one-time basis.
The Government approached BIFR seeking its approval for the induction of a strategic partner along with the financial restructuring package approved by the CCD as Jessop is under the purview of BIFR.
Jessop has accumulated losses worth Rs 372.37 crore and its net worth stood at a negative Rs 290.38 crore as on September 30, 2001. The company is incurring losses averaging Rs 40 to Rs 45 crore per year for the past three years.
"The onus is now squarely on BIFR to revive the company by approving the package submitted by the Union Government," the sources said. The only other option would be to wind up the company, rendering 1,500 workers jobless, they noted.
The Government had implemented three financial restructuring schemes for the company since 1986 involving an amount of Rs 466 crore. However, all three restructuring plans failed.
On taking up the case, BIFR also made attempts to revive the company, which ended in failure. And in August 2000, BIFR asked the operating agency to explore the possibility of changing the management. An advertisement issued by the operating agency in September 2000 also failed to attract proposals for reviving the company.
If approved, this would perhaps be the first case of a revival scheme being cleared by BIFR which involves change of management of a sick public sector company through the induction of a strategic partner identified by the Government through a competitive bidding process.
An extraordinary general meeting of Jessop will be held on March 20.
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