Laden with an outstanding debt of nearly Rs 2.85 billion, the iconic public sector enterprise, Burn Standard Company, which is facing the insolvency resolution process in the Kolkata bench of the National Company Law Tribunal (NCLT), is banking on monetisation of landholding to save the company from liquidation.
Sources said the company, which traces back its foundation to 1781, has nearly 422 acre of land across West Bengal, Jharkhand, Rajasthan, Tamil Nadu and other locations which is valued at nearly Rs 8 billion -- enough to pay the outstanding dues to its financial and operational creditors as well as the retired employees and suffice the needs of working capital estimated at Rs 1 billion.
However, book keeping hasn't been consistent and most of the land has been encroached upon. Company officials are now in talks with the respective state governments to free the land under its ownership.
A senior company official said that since the company's assets are more than the existing liabilities, the resolution professional has to come up with a revival plan which needs approval from the committee of creditors. The United Bank of India is the sole financial lender to Burn Standard Company besides 196 other operational creditors whose consolidated exposure to Martin Burn Company is Rs 620 million.
As per Anutosh Bandyopadhyay, former general secretary of All India Federation of Burn Standard Officers' Association, dues to retired employees, including arrears, is estimated to be in the range of Rs. 3-3.5 billion.
"Moreover the United Bank of India is also not keen to seek liquidation but wants the company to live on and pay off the dues. The bank, until now, hasn't marked us as a non-performing asset", the company official said.
As per NCLT provisions, after getting an extension, the resolution professional has to come up with the resolution plan on February 24.
Company sources said the railway ministry has also made a Rs 4.17 billion budgetary provision which they think signals additional financial support for the revival package.
As per company officials, sale of the land will not only clear off its loan books, but will also induce fresh working capital into the company which will help it not only to further its coach and wagon making capabilities but will also help in diversifying into shipbuilding.
"The only problem currently is lack of working capital.
Backed by a riverfront, we had made much progress with our plans of shipbuilding where nearly 70 per cent of the work was done. But lack of funds stalled that diversification. If the capital requirements improve, we can restart that project", the official quoted above said.
In September last year, its board had proposed a Rs 3 billion land sale to the railway ministry to ease the company's liabilities situation but didn't hear back. The firm is under the railway ministry.
The company, whose accumulated loss stands at Rs 2.84 billion, has been able to churn Rs 1.97 billion as its revenue during the nine months ended December 31, 2017.
Officials said the railway ministry has placed "sufficient orders for next two years" which has strengthened its order book.
Post the resolution process, the company, whose net worth stands at a negative Rs 1.07 billion, faces three alternatives - in the first place, the ministry might keep the company alive in case the lenders agree to the resolution plan and land can be monetised; secondly, it can rope in a private partner for the company or sell it altogether; and the third choice would be to shut down this PSU altogether, which has been officially sick since January 1995.
A source said that while filing its report to the Niti Aayog, the railway ministry had stated Burn Standard Company as "a unit of strategic importance" as it can make coaches and wagons with capability to manufacture new designs, can build most of the components needed by the railways and can quote "cost-effective prices while bidding in tenders".
However, a section of company officials are sceptical that the railway ministry's budgetary provision might imply payment of dues to the retired workers and the existing ones to pave the way for disinvestment.
|Burn Standard Company: Timeline of event|
|1781: Burn & Co founded in Kolkata|
|1828: Construction business of Burn & Co taken over by Martin & Co|
|1918: Indian Standard Wagon founded in Kolkata|
|1950s: Burn & Co diversifies into railway engineering|
|1976: Burn & Co nationalised. Amalgamated with Indian Standard Wagon to form Burn Standard Co|
|1987: Burn Standard Co placed under BBUNL|
|1995: Declared sick, Burn Standard Co referred to BIFR|
|2010: Company's ownership shifts from BBUNL to the Railways Ministry|
|June 2017: Company's board refers it to NCLT after Sick Industrial Companies (Special Provisions) Act, 1985 is repealed in 2016|
|February 2018: Resolution professional fails to come up with package on Feb 13. NCLT gives extension to Feb 24|