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G. Gurumurthy

ERODE, May 2

SKM Egg Products Export (India) Ltd, the 100 per cent export-oriented egg processing unit in Erode, is hoping to get its project out of woods during the current year following improved marketing conditions.

The company has been facing marketing hiccups since its inception in 1997 resulting in capital erosion. However, after its recent financial revamp, prescribed by the Price Waterhouse-Coopers aimed at bringing down its high cost debt burden, the firm is hoping to end the fiscal with a 10 per cent growth in sale and a 15-20 per cent improvement in its net profit.

``We hope to achieve a capacity utilisation of around 80 per cent and our sales are anticipated to go up by a moderate 10 per cent to touch around Rs 48 crore from Rs 43 crore as on March 31,'' said Mr S.K.M. Maeilanandhan, Chairman and Managing Director of SKM Egg Products Export (India) Ltd.

Last year, the company managed to reverse its negative profits recorded between 1997 and 2000 with a slender net profit of Rs 45 lakh for end-March 2001.

After accruing a net profit of Rs 3.83 crore in March this year, the company is hopeful of wiping out the last traces of its accumulated loss (of Rs 1.45 crore) still sticking to it in the current year. ``Maybe we'll end up with a net profit of around Rs 4.5 crore this year,'' Mr Maeilanandhan said.

SKM Egg Products' confidence on a better performance stems from improved market access gained by it in Japan and EU markets as the latter, especially is expected to further throw open through relaxation of its restrictive poultry imports and customs duties.

New egg products for special application (such as special yolk powder used by certain food processing industry) and their derivatives is also in the pipelines of SKM which, according to Mr S.K.M. Shree Shivkumar, the Executive Director of the company, would fetch higher value for the products. Another ray of hope is the transport subsidy announced by the Centre under new the Exim policy for poultry exports.

Launched at a cost of Rs 35.5 crore in 1997 in association with the Tamil Nadu Industries Development Corporation (Tidco), SKM Egg Products with an installed processing capacity of 10 lakh eggs per day got into severe marketing crisis within months of commercial launch due to global recession and price fall for processed egg. Further, the presence of pesticide residue in its egg products led to rejection of the company's finished products in the EU markets, the major market for egg yolk powder.

This forced the company to operate its sophisticated egg powder plant at Solangapalayam near Erode at 20-22 per cent of the installed capacity between 1997-2000. It also had to initiate measures to rectify pesticide residue. The low turnover coupled with high cost of funds rendered the company to incur a cumulative loss of Rs 13.55 crore as on March 31, 2000.

SKM Egg Products company had obtained term loan from IFCI (both Indian rupee and foreign currency loan) of Rs 19 crore and the project cost later escalated to Rs 44 crore due to exchange rate fluctuation causing further problem for the unit.

``The cost of term loan availed from IFCI was high at 21 per cent. To reduce the debt burden, we worked out a one-time-settlement (OTS) with IFCI that offered interest waiver of Rs 7.82 crore. We have agreed to pay back the principal loan amount of Rs 25.85 crore. As per the OTS terms, we have already paid 25 per cent of the loan amount and four of the 10 quarterly instalments that worked out Rs 14.22 crore. The balance instalments would be paid in six instalments spread over two years,'' the Chairman said.

To make OTS operative and capital restructuring going, the promoters of have brought in further Rs 7.87 crore into the project in the form of preferential equity which has hiked its equity capital from Rs 18.51 crore to Rs 26.33 crore. An additional Rs 6.35 crore was brought from internal generation. A bulk of the fresh capital infusion made was possible due to fund shift from SKM group flagship, SKM animal Feeds, which had contributed Rs 6.42 crore.

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