Financial Daily from THE HINDU group of publications
Wednesday, Aug 11, 2004
TCC plea to convert loan into equity
Kochi , Aug. 10
THE State-owned Travancore Cochin Chemicals (TCC) Ltd at nearby Eloor, which has been struggling to get out of the red for the past several years, has requested the State Government to convert its loan liability into equity.
Attributing the poor financial performance to the debt burden of Rs 47 crore to the Kerala Infrastructure Revitalisation Fund (KIRF) at 12 per cent, Mr N. R. Subramanian, Managing Director, TCC, said the company has to dole out Rs 6.5 crore for debt servicing alone per annum.
"Once this loan is converted into equity, no concessions would be needed for running the company profitably," Mr Subramanian, told Business Line on Tuesday.
Despite this phenomenon, the company was able to make a marginal profit of Rs 1 lakh during April - June 2004 as against a net loss of Rs1.52 crore in the same period last fiscal, he said. The sales turnover during Q1 `04 stood at Rs 24.55 crore as against Rs 24.46 crore in the same period last year, he said.
Closure of Mavoor Rayons, South India Viscose and the Travancore Rayons Ltd (TRL) has resulted in the company loosing its basic market; that is 40 per cent of its caustic soda capacity, he said.
Given this situation, the company had reduced its built-in capacity to cater to the requirements of other buyers such as the Kerala Minerals and Metals, Cochin Minerals and Rutiles Ltd and Hindustan Newsprint Ltd. Besides, it is keeping certain excess capacity to take care of the fluctuations, he said.
To reduce the cost of production, TCC had already closed down its mercury plant and started revamping its membrane cell plant without affecting the normal production schedules, and it would be over by next November, he said. In addition, the capacity of this unit will be raised by 25 tonnes a day to take the total capacity to 150 tonnes a day.
The expansion, which will involve an investment of Rs 22 crore, is scheduled to be completed by March /April next, he said. The revamping of the unit, he said, would result in a reduction in power consumption by 30 million units a month. Around 50 per cent of the turn over of the company -Rs 45 crore goes towards power cost per annum.
On the other hand, he said, the company had presented a case with the Kerala State Electricity Board (KSEB), seeking some concessions to the company, as it is a bulk consumer drawing the power efficiently. He said that TCC's energy management "with 98 per cent power factor and 86 per cent load factor" had been recognised by the Electricity Regulatory Commission and the KSEB.
In other States, such units are given concession in tariffs. Hence, the company is also expecting a positive decision from the Board.
The company had dropped its proposed captive power plant project in Kannur district, as the cost of the power generated here will be Rs 3.03 a unit. The final cost of the project would add up to Rs 70 crore for generating 38 million units, which would be around 30 per cent of its requirement, he pointed out.
On other hand, the Government has not accepted the proposal to undertake the project under BOT, he said.
The potential availability of electricity from the Power Trading Corporation at competitive rates is also a reason for TCC not pursuing its proposed captive power plant, he said.
Besides, the company will be operating with limited manpower. Already the manpower strength has been reduced to 770 now from 1,200 and it is expected to come down to 680 by the end of 2005, he added.
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