The Hindu Business Line : FACT facing funds crunch

THE crisis in the ailing Central public sector, Fertilisers and Chemicals Travancore Ltd (FACT), appears to be taking a serious turn with the company finding it difficult to purchase enough raw materials for manufacturing its products for the next farming season.

The company has already availed itself of the Rs 185-crore bank limit of working capital; and in the absence of any internal resource, purchase of raw material is going to be seriously affected, a senior official told Business Line. The first priority has been payment of wages aggregating around Rs 148 crore per annum. Flow from the market is very thin, he said.

It is the time for the company to procure raw materials for manufacturing the products for sale in the market targeting the next season. There is tough competition in the market and hence the company would have to do the billing in advance and supply the products at concession rates.

Sale proceeds would come only after commencement of the farming season and till then the company would have to stock the products bearing the inventory cost. Shortage of working capital seems to have forced the company to change its production schedule and resorting to an early shut down for maintenance, which used to be done normally in April - May, the source pointed out.

He said that failure of monsoon both in Kharif and Rabi in 2002-03 and the huge year-end inventory forced the company to liquidate stocks in February 2003 by offering special terms. They were consumed only during Kharif 2003, he said.

During the last fiscal FACT had achieved a turnover of Rs 1,205 crore as against 1,293.88 crore during the previous year and suffered a loss of Rs 199.93 crore, he said.

If no decision is taken on the company's restructuring proposal without further loss of time, the interest burden will mount and this, coupled with depreciation, would erode the net worth of the company, he pointed out.

More Stories on : Sick Units | Fertilisers | Kerala

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page