Kerala PSUs Regaining Lost Glory

Thiruvananthapuram / Kochi:  When the Left Democratic Front (LDF) Government came to power in Kerala in 2016, the situation of State Public Sector Undertakings (PSUs) was not rosy as most of them were mired in deep debt and making continuous losses. A number of issues – technical and financial – have been haunting them. However, sustained efforts by the State Government, which is into its third year, have succeeded in repositioning these PSUs to help them achieve a turnaround in their fortunes.

With a State Government which is determined to revive sick PSUs, several units have started showing positive results, say Deepu Aby Varghese and Deepthi G S

The LDF Government’s strategy includes a slew of measures, like financial reorganisation, revamping of the purchase policy of the government, integration with Central public sector institutions, restructuring of managements, and steps to check corruption and ensuring continuous monitoring.

“The State Government has also given priority to measures like modernisation of manufacturing mechanisms and diversification of commercially potential consumer items,” noted Pinarayi Vijayan, Chief Minister of Kerala, in the recently-published progress report of the LDF Government.

Titanium products have huge demand in the national and global industrial market. Domestic requirement and export possibility of titanium products are on the rise. With a vision to exploit such possibilities to the advantage of the State, the government has decided to build a ‘complex’ for making value-added products from titanium. A market survey for establishing the complex has already been completed.

While the total losses made by PSUs in Kerala during 2015-16 financial year was Rs. 131.87 crore, the incumbent government could bring it down to Rs. 80.67 crore in the last fiscal. Out of the 40 PSUs audited, 14 units registered profits in the final quarter of the fiscal.

According to State Industries Department, large-scale expansion of public sector units is being planned. The plan is to make capital expenditure for expansion using the capital accumulated over a period of three years. “The public sector has already reached a position wherein they could accrue a profit of Rs.106.91 crore. In the coming years, the profits will be used for implementing expansion projects,” said A C Moideen, State Industries Minister.

Another mid-term goal of the PSUs is to reach global markets with competitive spirit. The government is also planning to expand the production in PSUs to other states as well, assessing the availability of cheaper raw materials and proximity to potential markets.

Tackling Corruption

Corruption gripping the PSUs is often related to sales and purchase activities under the system. In a bid to curb this and further empower the sector, actions will be taken on the basis of the AG’s report to ensure transparency. On the other hand, it is important to develop model company charters for institutions under public sector. The charter, as envisioned by the government, will lay guidelines for board elections and their responsibilities. Also, it will have plans to award autonomy to PSUs which fulfil certain commercial criteria. “The government is currently undertaking measures to finish social auditing in PSUs which do not fall under industrial and commercial categories,” Minister Moideen said.

In the near future, according to government sources, major technological overhauls will be initiated in the PSUs. Policymakers are hopeful of roping in the services of premier think-tanks and R&D facilities like Indian Space Research Organisation (ISRO) and Council of Scientific and Industrial Research (CISR) for the benefit of the sector.

THE PSU BALANCE SHEET

Public Sector Undertakings in Kerala are on the growth path with the State staying true to its promise of reviving the sector

14 PSUs  have made profits.

 

JOBS CREATED

2,13,745 jobs created in various fields in 2016-17

2,00,000 jobs to be created in various fields in 2018-19

 

PROJECTS

Amballur Electronic Hardware

Light Engineering Park – Palakkad

Mega Food Park – Cherthala

Petrochemical Park – Ernakulam

 

PROFITABLE COS

Travancore Titanium Products

Travancore Cochin Chemicals

Kerala State Industrial Enterprise

Traco Cable Company

Steel & Industrial Forgings

Kerala Minerals & Metals

KMML Cruising Forward With Record Profit

The Kerala Minerals & Metals Ltd. (KMML) made a huge leap forward by registering a record profit of Rs. 148.77 crore in the last fiscal after suffering continuous losses in the past. One of the major reasons for the increase in profits is the skyrocketing prices of pigment – titanium dioxide, manufactured by KMML, in the international market.

Well positioned by the spurt in the prices of titanium dioxide in international market, KMML depends on internal accruals for capital expenditures

“We studied the international market well enough before fixing our price. It was important for us to fix the right price because rise in international price would just not help us. We had to have the awareness about the market we were entering into,” said K K Roy Kurian, MD, KMML.

Following the recent economic reforms in China, they decided to promote real estate business. And that forced China to reduce exports of the pigment by 25 to 30 per cent. Until then Chinese pigments used for the manufacturing of paints had a formidable presence in Indian markets. In short, the policy change in China proved a blessing for KMML.

Another factor which turned out to be a favourable one for KMML was once again the changes in China’s industrial sector. Due to the rise in pollution, the Chinese Government strengthened the environment rules applicable in industrial sector which, in turn, forced the pigment makers to curtail production.

“The reduction in Chinese exports and production gave KMML space both in domestic and international markets,” says K Raghavan, General Manager, KMML. With the CAGR of Indian paint industry being projected at 10 to 15 per cent, Asian Paints opening a new production plant in Mysuru and multinational paint giant like Akzonobel starting operations in India, KMML could not have waited for better opportunity to seize the market for titanium dioxide. “We fix the prices after studying the position of our potential market first and then we align KMML in a way which will best suit our customers like Nerolac, Berger and Asian Paints,” Raghavan says.

KMML at present depends on internal accruals for the capital expenditures. “In tandem with the government’s policy we use KMML’s internal accruals for expansion projects. There has been no need for the government to make financial intervention in the last couple of years,” he says. However, he adds, the LDF Government’s support has been crucial in reviving projects which were put on the back burner due to several reasons. “The government has been supportive ever since it came to power. It helped in starting some projects which remained stuck for the last many years,” he adds.

A proposal for an oxygen plant was floated in 1999. Finally, the foundation stone for the project was laid recently and the works are underway. KMML also commissioned a plant to convert LPG to LNG. The government has also approved a project worth Rs. 998 crore. According to KMML authorities, the discussion for the implementation of the project is underway.  With a net worth of over Rs. 800 crore, KMML has relatively cleaner balance sheet.

Branded as KEMOX, the various products of KMML go into the manufacturing of dress materials, cosmetics, tablets, newsprint, wood paints, emulsions, enamels, plastics and printing ink. KMML also hosts the Titanium Sponge Plant (TSP), a joint venture with Vikram Sarabhai Space Centre (VSSC) and Defence Metallurgical Research Laboratory (DMRL).

On a Recovery Path, KSIE Registers Profit

Kerala State Industrial Enterprises Ltd. (KSIE), a public sector enterprise which registered a loss of Rs. 6 crore last year, is making a turnaround by clocking a turnover of Rs. 86 crore and net profit of Rs 1.53 crore in the financial year 2017-18.

Effective cost control measures along with firm backing by the State Government have helped the PSU to stand on its feet

During the last financial year, KSIE exported 25,600 metric tonnes of cargo from Thiruvananthapuram International Air Cargo Terminal, 17,800 metric tonnes from Calicut International Air Cargo Complex and handled 6,900 containers from Cochin International Container Freight Station.

Kerala Soaps, the new initiative of KSIE, earned profit with a turnover of Rs. 10 crore. Kerala Soaps products are available in India as well as abroad, including countries like China, Japan and the UAE. “This achievement is the result of the commitment of the employees and cooperation extended by the State Government,” said Dr. Febi Varghese, MD, KSIE.

In order to make KSIE profitable, effective cost control measures have been undertaken to reduce unnecessary expenditures. While Kerala Soaps is one of the factors which helped register profit in the last fiscal, trading activities undertaken by KSIE in India and abroad, mainly in China and recently in African countries, also played a crucial role, according to Dr. Febi. At present, Kerala Soaps has a production capacity to manufacture 6,000 tonnes of soap, including beauty soaps and toilets soaps annually. The premium product of Kerala Soaps – Kerala Sandal, which according to the company, contains virgin sandal oil has been conquering international market for some time now. Brands like VEP bathing bar, Kairali bathing bar, Kerala Carbolic soap bar and Washwell detergent cake are the other products marketed by Kerala Soaps. Buoyed by the success of its products, the PSU has decided to supply the soaps in the local market through government outlets also. Following the success of Kerala Soaps like international markets like China, Japan and the UAE, KSIE has plans to expand the exports to more countries, starting this financial year.

He added that KSIE has plans to implement a project worth Rs. 100 crore for the renovation of the International Air Cargo Terminals in Thiruvananthapuram and Kozhikode and another project worth Rs. 10 crore for the modernisation of the Cochin International Container Freight Station at Kalamassery.

According to Dr. Febi Varghese, most of the modernisation projects have been approved by the government. However, work will commence only after the acquisition of land.

In the current financial year, KSIE expects a turnover of Rs. 125 crore and a net profit of Rs. 5 crore. “With a firm backing from the State Government, I am confident that KSIE will achieve the targets in this fiscal as well,’’ he said.

TRACO Remains a Shining Example

TRACO Cable Company Limited (TRACO) is one of the ISO 9001-certified Public Sector Undertakings in Kerala. Established in 1964, the company has three manufacturing units. TRACO’s first unit came up at Irumpanam near Thripunithura followed by a second unit at Thiruvalla in Pathanamthitta district. Presently, the installed capacity of both these units engaged in Aluminium Wire Rod conversion is 9000 MT. The third unit was commissioned in 2011 at Pinarayi in Kannur for the exclusive production of wiring cables for buildings, the gauge of which ranges from 1 sq. mm to 10 sq. mm.

With Santhosh Koshy Thomas at the helm, TRACO Cable Company  is in the cusp of positive change with major expansion plans

TRACO has been meeting the needs of major customers which include Electricity Boards, Railways, BSNL and ESCOMS of other states and various project groups. Having an employee strength of more than 500, the company’s vision is to grow as one of the leading players in the cable industry, catering to the needs of a variety of customers. Santhosh Koshy Thomas, who assumed charge as the Managing Director of the company two years ago explains “This year we started with a pending order of Rs. 120 crore. We have also received another order of Rs. 25 crore in the last two months. We are expecting orders worth Rs. 250 crore this year and setting a sales target of Rs. 190 to Rs. 200 crore. Besides, we are expecting a turnover of Rs. 25-crore from wire cables manufactured at our Pinarayi unit.”

Until two years ago the unit at Pinarayi manufactured 2000 to 3000 coils monthly. However, TRACO has recently upped production at this unit to 18,000-20,000 coils a month. “From last October it started to make monthly operating profit. As things stand today, we believe we can touch Rs. 175 to Rs. 190 crore this financial year. We are also manufacturing conductors apart from products like weatherproof cables, control cables, AB (Aerial Bunched) cables and UG cables,” he adds. TRACO handles both supply and contract of laying UG Cables, as a turnkey project. “We have planned close to Rs. 50-crore turnkey projects,” Santhosh adds.

He recalls the support extended by the state government and credits it for making the turn round possible for TRACO. “this government has taken a favourable stand towards electrical companies associated with electricity board. TRACO’s products are currently the best in terms of quality and are the lowest priced in the market. The company is among the approved vendors for the government’s total electrification project. TRACO is aiming to secure 25 per cent of kerala market share in the building wire-cable industry in the next three years,” Santhosh says.

Traco has been supplying to major customers including electricity boards, railways, BSNL and escoms

TTP Back on Track

Over the last two years, Travancore Titanium Products (TTP) in Thiruvananthapuram has emerged as one of the most successful PSUs in Kerala. The driving force which helped TTP in improving the balance sheet and registering profit is the consistency in production.

“Production has increased and it has been achieved in a very cost effective manner. Earlier, there were several reasons due to which we were not able to fully utilise our production capacity. But this time we are able to maintain consistency in production though we had to deal with an industrial accident last year,” says George Ninan, Managing Director, TTP.

The State Government has played a crucial role in helping TTP tide over the crisis in the last couple of years. TTP was allotted a corpus of Rs. 26 crore and Rs. 5 crore in two lump sums. In 2016, the company was in heavy loss and had loans due to which the balance sheet remained shoddy.

Interests of some of the loans were as high as 14.5 per cent. A high-level committee was formed by the government and it was agreed to go for a financial restructuring which included the conversion of debts into equities.

“A capital infusion is inevitable as TTP’s net worth became negative. So we are expecting another corpus of Rs. 30 crore to clean up the balance sheet,” says Sreekumaran Nair, General Manager (Finance), TTP.

The government has allotted another Rs. 4.99 crore to settle the debts. According to the management, it was a very thoughtful action from the side of the State Government. “Even if we make profit in the subsequent years, we would be able to settle only the interest,” he adds.

However, there are many more issues that need to be addressed in order to ensure the growth of the company. Following directions from the Kerala State Pollution Control Board (KSPCB), TTP plans to set up a Copperas Recovery Plant.

“Setting up of Copperas Recovery Plant would effectively reduce pollutants. It will be another factor which could ensure profitability. However, TTP is struggling to find funds for setting up the plant,” says Nair.

According to him, in spite of its turnaround, TTP is not eligible for a loan as issues reflecting in the balance sheet hamper the chances of obtaining credit from banks. “What the State Government has instructed us is to utilise the grant of Rs. 26 crore to improve our production and stand on our own feet ahead of the next modernisation process. And that is exactly the goal of TTP at present,” he says.