Financial Daily from THE HINDU group of publications
Wednesday, Oct 30, 2002
ECIL: Back in fast lane
Dr A.S. Rao Founder Chairman
THE beginning of the new millennium has seen a virtual resurgence of Electronics Corporation of India Ltd (ECIL), the premier electronics technology provider for key areas such as nuclear, defence and communications. From the throes of BIFR reference, it is back on the path of fast growth.
The `about-turn' in the fortunes of the company required no management consultants, but a dedicated workforce, which rallied solidly behind the committed top management, says the Chairman and Managing Director, Mr V.H. Ron, who led this exciting journey for the company beginning end of 1998.
"The biggest lesson of the turnaround has been the change in the mindset of the employee. Today, the common thread motivating us is that we should be efficient, productive and competitive''.
The company has also proved another point in these few years. ECIL is not just one of the few public sector units to turn around, but has in a way disproved a popular perception held by bureaucrats that "PSUs come to the Government for help, they are doled out some sops and after sometime go back to the same sickness," Mr Ron said.
It was the summer of 1998, when the company found itself at its rock bottom, since inception in 1967. The loss zoomed to Rs 60 crore, the net worth plummeted to Rs 7 crore and under the SICA, it had to be referred to BIFR.
Pokhran 1998 was another big challenge. With sanctions coming in, ECIL was placed on the banned entities list, thus being denied components, collaborations etc from not just US companies, but also other developed nations.
The impact of globalisation and economic liberalisation in the country, which brought in intense competition from MNCs and domestic private sector players also started showing on the bottom line of the company.
Internally, the company had to face reversals in the form of the then CMD, and the Director-Personnel and some others quitting. The financial crunch, sanctions and the company developments pushed the employee morale down.
ECIL, in consultation with the parent body - the Department of Atomic Energy (DAE), sought the views of management consultants. The response was not encouraging. They said unless the Government committed itself to definite orders, ECIL would not revive, Mr Ron recounted.
A detailed presentation by the top management of ECIL, with the support of the then DAE Secretary, Dr R. Chidambaram, to the Government followed. At the end, the Government said "ECIL cannot be allowed to go to seed''. The result was the company got help in the form of `moral support' and `Budget neutral' concessions. The essential features were conversion of outstanding Government of India loans into equity (around Rs 45 crore), waiver of interest on loans between 1995-96 to 1999-2000 (Rs 16 crore) and waiver of penalties levied by the Department of Telecommunications and Ministry of Defence.
"If we had got a grant for restructure perhaps, we would not have this story to tell," recounts the top brass of the company.
How was the change brought about? In addition to the Government support, the ECIL management set in motion a series of internal restructure measures.
Departure from doing many things, to the slogan "What we can do best, we should. Rest we should outsource''. This helped the company develop 10 products in 6 months, through networking, and at a cheaper cost, said Wing Cmmdr Chandrasekhar, Director-Technical.
These key internal interventions have helped us turn around, fulfil all our statutory payments such as PF, Gratuity to employees and the company emerged with a profit of Rs 79 crore at the end of fiscal 2001-02.
In 1967, when ECIL was shaped under the able leadership of the first CMD, Dr A.S. Rao, the slogan was `self-reliance' in electronics technology. Dr Rao brought a dedicated team of engineers and scientists from the electronics department of the Bhabha Atomic Research Centre (BARC) and undertook challenging projects in computers, communications and control systems and instruments.
With no foreign collaboration it had to develop everything from scratch. Import substitutions for technology denial was core strength. The major drawback of this initial focus of the company was no slant on commercialisation and market penetration.
However, ECIL, which is an offshoot of the recommendations of the Homi Bhabha Committee on electronics, remained a profitable PSU till 1997, barring a few years when it made marginal losses.
The broad-based strength of the company stood it in good stead and in profits. It made the first digital computer in 1969, analog computers, air defence ground environment systems, software applications for LIC, police department. In addition it ran a large training programme in computers during 1970-80, which resulted in the creation of a large pool of professionals.
During the 1980s, the company forayed into TVs and other consumer products. It created a mark in the TV sector and computer hardware. The mainframe computer was another area, which later proved to be a big burden. Finally, the Government had to absorb a huge financial cost to shut it around year 2000.
ECIL also diversified from its core strength of nuclear control and instruments to big projects in the telecom, insurance, police, para military forces, oil & gas, power, space, education and health to emerge as a multi-product company serving multiple sectors of the Indian economy. With the main stakeholders in the company, the officers, the unions and Government's support, ECIL is looking ahead to emerge as a global company. Though, "plans are at the nascent stage, we have to aim big'' said Mr Ron.
Having already executed projects in Mauritius and bid for some in Malaysia, the company feels a marketing presence abroad would give it an edge in global bidding. It has also identified about 17-18 products that have international market.
Dr Anil Kakodkar, Chairman, Atomic Energy Commission, on ECIL's turnaround:
Dr Anil Kakodkar
ECIL had difficulties and needed to restructure to convert itself into a vibrant and commercially sound organisation. The Government supported it well and the staff rose to the challenge to tide over the problems and emerge stronger.
The economic realities of the 1990s and the tough times in television, mainframe and other areas into which ECIL diversified needed to be squarely faced. Having done this, ECIL should now concentrate on higher end of technology, especially that which the country needs and is not easy to source from abroad or wilfully denied.
The expertise and core competence developed at ECIL has played a key role in the growth of strategic sectors like defence, nuclear and space for the past 35 years.
In electronics, where technology obsolescence rate is high, ECIL has kept pace with the best and served the country well. The basic purpose for which it was created to serve the nuclear programme through development of control and instrumentation systems, it has been in the forefront. It has kept pace with the R&D groups at the Bhabha Atomic Research Centre and NPC and ensured latest technology access to the nuclear power programme.
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