REHBLITATION OF SICK INDUSTRIAL UNITA CASE STUDY –NICCO BATTERIES

PRESENTED BY

ABHINAV SRIVASTAVA2007101001 P.G.D.MB.B.D.N.I.T.M

According to Sick Industrial Companies Act, 1985

It was registered for at least 7 year . It incurred cash from losses for the current and

the preceding year.According to RBI A sick unit is one which incurs cash losses for

one year and in the judgment of the bank it is likely to continue to incur cash losses for the current year as well as for the year .

SICK UNIT

Internal causes

External causes

CAUSES OF SICKNESS

Planning

Implementation

Production

Labour management

Marketing management

Financial management

Administrative management

Internal causes

Market saturation

Extraneous factors

Government price controls

Non-availability of adequate finance

Non availability of irregular supply of critical

raw materials or their inputs.

External causes

The SICA had been deal in the public interest to deal with the problems of industrial sickness with regard to the crucial sectors where public money is locked up.

It contains special provisions for timely detection of sick and potentially sick industrial companies, speedy determination and enforcement of preventive, remedial and other measures with respect to such companies.

Those measures are to be taken by a body of experts. (a) Legal (b) Financial restructuring (c) Managerial

Objective Of SICA

The Government of India provided various concessions and incentives to the Sick sector for their sustained growth

◦ Assisting new Sick units on soft terms by lending institutions,

◦ Reservation of Certain Industries for the SSI sector, ◦ Incentives related to land/shed financing,

machinery and raw-materials, ◦ Provision of facilities within the Industrial Estates,

and ◦ Excise duty exemption and price preference

Govt. Concessions and Incentives for the Sick Sector

.

CASE STUDY ON

NICCO BATTERIES LTD

Nicco Corporation Limited (NCL) is the flagship company of the Nicco Group.For nearly over six decades, NCL has been one of the pioneers in cable manufacturing industry. It produces a wide range of power, control, instrumentation and telecom cables and provides a spectrum of engineering services and executes turnkey projects. Established in 1942, the US$ 67 million Nicco Group is a widely respected Indian industrial powerhouse.

ABOUT NICCO Corporation Ltd

Aircraft & Air Field Cables Fire Retardant Low Smoke Cables (FRLS) Automobile Cables Oil Rig Cables Copper Conductors Cables For Cranes Elevator Cables (lift Cables) Furnace & High Temperature Cables Marine Cables Power Cables

NICCO’s PRODUCT

NICCO BATTARIES LTD amalgamated with NICCO Corporation LTD (NCL) with effect from 1 April 1994 as per the amalgamation scheme

In the amalgamation scheme the entire undertaking of NBL shall be transferred to NCL and the transferee company, that is, the NCl shall issue and allot the share holder of the NBL share in the transferor company in the proportion of 2 share of the face value of Rs10 each of the transferee company for 13 equity share of the face value Rs.10 each

NICCO BATTARIES LTD.

The rehabilitation –Cum-amalgamation scheme envisages settlement of dues of the bank and the institution, payment to pressing creditors besides capital expenditure of Rs 163 lakhs.

Contd……..

A Cost of the scheme: ( Rs in lakhs) Capital expenditure 163.00 Settlement of dues of the banks 619.00 Payment of unsecured loans from 20.00 Payment of pressing creditors 18.00 Margin money for working capital 57.00 TOTAL 877.00

B Means of finance (Rs in lakhs)•Promoter’s contribution out of internal accruals of NCL 477.00•Benefit under section 72 A of IT Act,1961 400.00

TOTAL 877.00

The scheme for amalgamation of NBL , with NCL shall be under section 72A of the IT Act,1961 and shall be effective from 1 April ,1994 .

The carried forward accumulated loss of NBL

is estimated at Rs 1896 lakhs as on 31 March 1994.

The estimated tax set –off at the current

rates of IT Act , 1961 is restricted to Rs . 400 lakhs.

Synergistic operating economies

Diversification

Taxation advantages

Growth advantage

Production capacity reduction

Managerial motivate

Acquisition of specific asset

Benefits in the merger of sick unit to the NCL

Dilution of competition in the market

Actual or a potential competitor, may get

eliminated.

Efficient and growing medium or small-sized

undertaking.

May exercise a market power to the

detriment of its customers and suppliers.

Risks in the merger of sick unit to the NCL

The rehabilitation of sick unit is an important aspect for the economic growth of the country as well as the growth of the country in the above case of NCL & NBL we can say that the share exchange ratio is 2 : 13 and the cost of scheme is Rs 877 lakhs . Which is large amount for merger though this we can conclude that the merger of NBL was the requirement of time and now it contribute major part of share of NCL.

CONCLUSION

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