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Monday, May 12, 2003

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Industry & Economy - Disinvestment

Despite being on the chopping block, HNL plans turnaround

Badal Sanyal


EVEN though the disinvestment process of Hindustan Newsprint Ltd (HNL), a wholly owned subsidiary of the State-owned Hindustan Paper Corporation (HPC), is half-way through, the HNL management is determined to go ahead with its plan to increase production so that it can regain its status as a profit-making company in the current financial year.

HNL had been a profit-making PSU till 2001-02. It incurred a loss of Rs 8.83 crore on a turnover of about Rs 215 crore in 2002-03 when it achieved a record production of 1,00,495 tonnes of newsprint against its plant installed capacity of 1,00,000 tonnes per annum. The basic reason for the loss was the comparatively poor sales realisation in the aftermath of the sharp fall in international and domestic newsprint prices.

Talking to Business Line from Kottayam in Kerala, where HNL's mill is located, Mr N.P. Prabhu said that an all-out effort was being made to ensure a moderate profit during the current year producing at least 11,000 tonnes more than last year while the sales turnover target has been set at about Rs 244 crore. Mr Prabhu said his objective was to bring down the production cost by way of various cost-cutting measures so as to make HNL newsprint more competitive in the market. Thus, the management had plans to outsource non-core activities, go in for high volume production to reduce unit costs, continue cost control and realisation measures, optimise use of "de-inked" pulp and source more raw materials through the "purchase at the gate scheme."

Commenting on the disinvestment process of HNL, he said, "The management is not bothered about the disinvestment because it is the government's prerogative. As professional managers, we want to see the company in robust health." However, Mr Prabhu felt that, in the case of any disinvestment, the company would be handed over to a reputed organisation.

It may be mentioned that more than a year has passed since the notification was issued inviting expressions of interest (EoI) for HPC's 74 per cent of the total equity stake in HNL. Altogether nine buyers had submitted EoIs. Available information suggests that there are only two parties are left in the race to buy the 74 per cent share. As financial bids are yet to be asked, it is presumed that the Union Ministry of Disinvestment may have different view over the HNL disinvestment. Meanwhile, the HNL management has achieved its target of using recycled fibre thereby reducing dependence on virgin forest resources. This was achieved by commissioning a 33,000 tonne-per-annum capacity de-inking plant with capacity to make pulp from old newspaper and magazine paper. The plant was dedicated to the nation as recently as April.

Mr Prabhu said that domestic newsprint industry was passing through a phase of turmoil following the crash of international newsprint prices on account of global economic recession and dumping of newsprint from Canada, Russia and ASEAN countries. Newsprint was now available at prices between $380 and $400 per tonne.

He said HNL was unlikely to face a raw material problem in future because of its own plantations on 4,000 hectares of forest land leased from the Kerala Government. Moreover, the introduction of the "purchase at the gate" scheme had yielded very good results. Since the inception of the scheme in 1998, raw material to the tune of 2.5 lakh tonnes had been collected through farmers, he added.

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