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PRESENTED PRESENT ED BY BY ABHINAV SRIVASTAVA 2007101001 P.G.D.M B.B.D.N.I.T.M
SICK UNIT According to Sick Industrial Companies Act, 1985 ØIt
was registered for at least 7 year . ØIt incurred cash from losses for the current and the preceding year. According Accor ding to RBI ØA sick unit is one which incurs cash losses for one year and in the judgment of the bank it is likely likely to continue to incur cash losses for the current current year as well as for the year .
CAUSES OF SICKNESS
Internal causes
External causes
Internal causes
Planning
Implementation
Production
Labour management
Marketing management
Financial management
Administrative management
External causes
Market Market saturation
Extraneous factors
Government price controls
Non-availability of adequate finance
Non availability of irregular supply of critical raw materials or their inputs.
Objective Of SICA
The SICA had been deal in i n the public interest inter est to deal with the t he problems of industrial sickness with regard to the crucial sectors where public money is locked up.
It contains special provisions for timely detection of sick and potentially sick industrial companies, speedy determination and enforcement of preventive, remedial and other measures with respect to such companies.
Govt. Concessions and
The Government of India provided various concessions and incentives to the Sick sector for their sustained growth ◦
◦
◦
◦
◦
Assisting new Sick units on soft terms by lending institutions, Reservation of Certain Industries for the SSI sector, Incentives related to land/shed l and/shed financing, machinery and raw-materials, Provision Provision of facilities within the Industrial Estates, and Excise duty exemption and price preference
.
CASE STUDY ON NICCO BATTERIES LTD
ABOUT NICCO Corporation Ltd
Nicco Corporation Limited (NCL) is the flagship company of the Nicco Group. For nearly over six si x decades, NCL has been one of the pioneers in cable manufacturing industry . It produces a wide range of power, control, instrumentation and telecom cables and provides a spectrum of engineering services and executes turnkey projects. Established in 1942, the US$ 67 million NiccoGroup is a widely respected Indian industrial powerhouse.
NICCO’s PRODUCT Aircraft & Air Field Cables Fire Retardant Low Smoke Cables (FRLS) Automobile Cables Oil Rig Cables Copper Conductors Cables For Cranes Elevator Cables (lift Cables) Furnace & High Temperature Cables Marine Cables Power Cables
NICCO BATTARIES LTD amalgamated with NICCO Corporation LTD (NCL) with effect from 1 April 1994 as per the amalgamation scheme
In the amalgamation scheme the entire undertaking of NBL shall be b e transferred transferred to NCL and the transferee company, that is, the NCl shall issue and allot the share holder of the NBL share in the transferor company in the proportion of 2 share of the face value of Rs10 each of the transferee company for 13 equity share of the face value Rs.10 each
Contd… ….. The rehabilitation –Cum-amalgamation scheme envisages settlement of dues of the bank and the institution, payment to pressing creditors besides capital expenditure of Rs 163 lakhs.
A Cost of the scheme: Ø Ø Ø Ø Ø
Capital expenditure Settlement of dues of the banks Payment of unsecured loans from Payment of pressing creditors Margin money for working capital TOTAL
( Rs in lakhs) 163.00 619.00 20.00 18.00 57.00 877.00
B Means of finance •Promoter’s contribution
out of internal accruals of NCL •Benefit under section 72 A of IT Act,1961
TOTAL
(Rs in lakhs) 477.00 400.00
877.00
The scheme for amalgamation of NBL , with NCL shall be under section 72A of the IT Act,1961 and shall be effective from 1 April ,1994 .
The carried forward accumulated loss of NBL is estimated at Rs 1896 lakhs as on 31 March 1994.
The estimated tax set –off at the current rates of IT Act Act , 1961 is restricted restricted to Rs . 400 lakhs.
Benefits in the merger of sick
Synergistic operating economies
Diversification
Taxatio Taxation n advantages advan tages
Growth Growth advantage
Production Production capacity reduction
Managerial motivate
Acquisition of specific asset
Risks in the merger of sick unit
Dilution of competition in the market market
Actual or a potential competitor, may get eliminated.
Efficient and growing medium or small-sized undertaking.
May exercise a market power to the detriment of its customers and suppliers.
CONCLUSION The rehabilitation of sick unit is an important aspect for the economic growth of the country as well as the growth of the country in the above case of NCL & NBL we can say that the share exchange exchange ratio is 2 : 13 and the cost of scheme is Rs 877 lakhs . Which is large amount for merger though this we can conclude that the merger of NBL was the requirement of time and now it contribute major part of share of NCL.
