Bengal Chemicals bounces back after decades

Once sick firm finally showing a profit, with revenue up 6-fold in 3 years on a string of reforms

A much-needed corporate structure at Bengal Chemicals and Pharmaceuticals is evolving now, primary why this company, also the country’s first in the segment, was able to show a profit after 63 years.

After a dismal revenue of Rs 17.1 crore in 2013-14, down 38 per cent from a year before and a gross loss of Rs 36.6 crore, things began looking brighter the very next year. 

During 2014-15, revenue jumped by 169 per cent to Rs 45.8 crore and to Rs 88.2 crore during 2015-16. The loss narrowed from Rs 17.3 crore in 2014-15 to Rs 9.1 crore in 2015-16.

P M Chandraiah, now the managing director, who joined as director of finance in 2014, took steps to pull out the central public sector undertaking from the gross mismanagement and legacy issues which had plagued it for over 60 years. As soon as he joined, his first step was to rationalise the cost structure and introduce centralised purchases and billings. Chandraiah believes this was crucial to tighten managerial control, the primary bane.

Bengal Chemicals now has centralised accounts, issues centralised quarterly tenders for raw material procurement and raises the invoices centrally. Raw material cost to revenue fell from 88.6 per cent in 2013-14 to 76.4 per cent in 2014-15 and then further south to 52 per cent.

The next big step was financial discipline.

“When I joined, I found cost audits hadn’t happened for three years! Payments went in cash to 220 employees; payments to suppliers were not rationalised,” Chandraiah recollects. 

Salary accounts opened for employees and a cost audit undertaken. Suppliers are now paid via RTGS. The 35 bank accounts of the company were reduced to 25 and Rs 2 crore previously kept in current accounts has been reduced to Rs 25,000, ensuring the money isn’t kept idle. 

Chandraiah also pursued banks to reduce the interest on its loan dues of Rs 18.8 crore, from 14 per cent to 11.9 per cent. And, banking on his 31-year experience in the public sector, introduced labour discipline. Written off by the Centre from staging a comeback, it had become a den of trade unionism, primarily on account of managerial lax. The management chose not to coerce the trade unions but to take them into confidence, to stage a comeback. Formal annual appraisals were introduced and fingerprint sensors to mark attendance were installed.

In one instance, when the company installed gate passes and attendance machines in its Kolkata factory, the unions opposed the move. A union leader was then transferred to its Mumbai office. Apart from these, Chandraiah undertook other reforms. Such as its idling 70 acres. “We previously used to earn Rs 3 crore as rental income a year. It is now Rs 15 crore,” he said.

In the first half of this financial year, Chandraiah has been able to report a profit of 1.16 crore. He expects to close the year with revenue of Rs 100 crore and profit of Rs 4-5 crore. By 2020, the expectation is Rs 200 crore of revenue and profit of Rs 20 crore.
 

Nevertheless, the accumulated loss is Rs 262 crore and the net worth a negative Rs 184.6 crore. 

Bengal Chemicals traces its foundation to Prafulla Chandra Ray, considered the father of Indian pharmaceuticals, who set up this company in 1892 with Rs 700 as capital investment. It competed against British, became a renowned name by the mid-1930s and expanded outside east India. However, its fortunes declined after Independence, ultimately resulting in nationalisation in 1980. The financial losses continued and Bengal Chemicals was declared a sick company in 1992.