ON THE TOPIC:

SICKNESS AND REVIVAL OF

SICKNESS

SICKNESS

INTRODUCTION:-

Industrial sickness means when an industrial company

which has at the end of any financial year accumulated

losses equal to or exceeding its entire net worth and has

also suffered cash losses in such financial year and the

financial year immediately preceding such financial year.

Industrial sickness means a company failed to repay its

debt within any three consecutive quarters on demand for

repayment by its creditors

CAUSES OF INDUSTRIAL SICKNESS

External causes

Internal causes

External causes:

1.Power Cuts:

- lack of power electricity support

- shortage in electricity

CONT’D…

2. Erratic supply of inputs:

- shortage of raw material.

- lack of transportation facility.

- high price.

3. Demand & credit restraints:

- no equal balance of demand and supply and lack

of credit facility.

- lack of credit facility.

- storage expanses.

- chance of out of fashion.

CONT’D…

4. Government policy:

- change in government policy.

- lack of government support.

- high authority to large unit.

Internal causes:

1.Fault at the planning & construction stage:

- wrong location area

- absence of market analysis.

- unbalance capital structure.

2. Financial problem:

- unable to repay payment.

- lack of financial support from bank & institution.

CONT’D…

3. Defective plant & machinery

- lack of technical & professional skill

- lack of technology

- in efficient in machine.

- high maintenance.

4. Entrepreneurial incompetence

- lack of knowledge of market

- lack of efficient professional skill

- lack of innovation

SYMPTOMS OF SICKNESS

DELAY OR DEFAULT IN PAYMENT TO SUPPLIERS, BANK AND FINANCIAL INSTITUTIONS

IRREGULARITY IN BANK ACCOUNT

ACCUMULATION OF INVENTRIES

DECLINE IN CAPACITY UTILIZATION

DECLINE IN THE PRICE OF EQUITY SHARE

DECLINE IN THE PRICE OF DEBENTURES

REVIVAL OF SICKNESS

When an Industrial Unit is identified as sick a viability study

should be conducted to assess the unit, it covers:

Market

Operations

Finance

Human Resource

Environment

The viability study may suggest one of the following

measures:

Debt restructuring

Infusion of funds

Replacement of existing management

REVIVAL PROGRAMME

Settlement with creditors

Disinvestment and disposal

Strict control over costs

Streamlining of costs

Improvement in managerial systems

Workers participation

Change of management

Merger with a healthy company

HINDUSTAN MOTORS

Maker of Ambassador saloon, once the power symbol in

India is set to declare itself sick.

Revenue from its flagship product Ambassador tumbled

Slow to respond to aggressive competition from

multinational players such as Suzuki and Hyundai due to its

design which has remained virtually unchanged for over 6

decades

It had a negative net worth of Rs. 36 crore on June 30th

2013

Board of Industrial and Financial Reconstruction (BIFR)

A central Govt. agency that helps restructure bankrupt

companies or close down sick unit.

HM is the third automobile company to report in BIFR’s

door after PAL, the maker of Premier Padmini and FIAT

India.

REMEDIALChennai Plant is being planned to turn in to a separate

entity.

The Chennai unit does contract manufacturing for auto

giants such as Mitsubishi and Isuzu.

It also intends to bring in foreign investment for its

Chennai and West Bengal units.

It recently launched the BS-IV Ambassador Encore and

is developing a sub-4 metre version.

Besides Ambassador, HM also has Winner trucks in its

portfolio.

The company management says overall vehicle sales

would increase to 7,500 units this year.