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PSUS:
TEMPLES OF DOOM
Window
Dressing
The
PSU is 'revived' and up for sale. But SIL has cost the taxpayer a king's
ransom to be sale-worthy.
By
Sumit Mitra
Scooters
India Limited
Incorporated: 1972; HQ: Lucknow; Product: Scooters
Scooters
India Limited (SIL), the public-sector three-wheeler major, has recently
turned around. This, however, is no corporate miracle; rather it is a
corporate mirage. SIL is a classic example of an "effective revival".
In the post-reform parlance of the government, this means superficially
nursing a sick company back to health for a sell-off of the state-owned
equity at the best price. It is very much like putting an accident-hit
car back into shape and then hoping for a better quotation from potential
buyers. It has also cost the taxpayer more than a king's ransom.
 |
| Sahay
says the worst is over |
In SIL's
case, the BIFR approved a revival plan in 1996, after the write-off of
a colossal Rs 609.77 crore in loans and interests. The waiver done, the
company is now ready for sale.
In the early
1970s, when the upwardly mobile middle class was just laterally mobile,
on scooters, the government decided it was time that the public sector
took at least a pillion ride. So jostling for road space with the Vespa
and the Lambretta of the day, SIL began churning out its Vijay series
of scooters. In an era of shortage, when a father had to apply for a scooter
his son would grow up to ride, nobody put SIL's operating figures under
the magnifying glass. The complacency at the SIL factory in Lucknow was
shattered in the early 1990s when its Rs 39 crore capital got fully eroded
and it was sent to BIFR.
However,
SIL managed to turn adversity into an opportunity, making use of a basket
of gifts from the state: besides waiving its dues, the government gave
the company fresh loans and a sales-tax holiday for five years. The first
thing SIL did was to junk its two-wheeler production line. The company
reinvented itself as a producer of three-wheelers.
The competition
in this sector is from Bajaj Tempo's Minidoor. SIL's Vikram, with a production
of 15,400 of these seven-seater three-wheelers, is in a close race. The
company's accumulated losses (post 1996) were wiped out last year, and
its current ratio, or the ratio of current asset to current liabilities,
is steadily rising. SIL Chairman-cum-Managing Director Arunaditya Sahay
says, "The worst is behind us."
SIL's turnaround
has made it a good takeover target. The Ministry of Heavy Industries has
cleared a proposal for selling off all but 24 per cent of the government's
95 per cent stake. Italian two-wheeler giant Piaggio and Suzuki Motor
Company of Japan are among SIL's suitors. Thus, from a sick child, SIL
has become a coveted maiden wooed by the most eligible grooms in the world.
The sickness
was due to India's socialistic past. "We were hiring unemployed engineers
earlier," says Sahay, "as we were told it was our social duty."
The hangover of "social duty" is still visible on the balance
sheet. SIL's wage bill is Rs 31 crore-nearly a quarter of its costs. However,
it is an attractive buy because of its massive capacity, 150 acres of
prime land and the company's knowledge capital in its core engineering
and marketing staff. Some of them might have been unemployed once, but
many are eminently employable by a private management.
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How
can Non-Performing Assets of companies be cleared? By recovering what
you can, writes INDIA TODAY Associate Editor V. Shankar Aiyar in
