Q&A: K Ramachandran Pillai, CMD, NTC

In the red for several years, National Textile Corporation (NTC) expects to make a profit from its operations this financial year, despite a marginal one at Rs 6 crore.

Once taking government money for paying wages and salaries to its staff, the company has not asked for budgetary support in the last two years. Though NTC has been making net profits (primarily because of sale of properties), it has accumulated losses of around Rs 6,000 crore.

For the year ended March 31, it earned a net profit of Rs 1,366 crore against a mere Rs 103 crore a year ago. However, it was still in operating losses of Rs 173 crore, though less than Rs 208 crore in the previous year. Chairman and Managing Director K Ramachandran Pillai tells Indivjal Dhasmana about the company's revival strategy. Edited excerpts:

When will the company start earning operating profit?
This is a big concern. This company had 119 mills. Now, it has only 20 mills (of 24 identified for revival). All of them are generating profit, but not net profit.

That is because investment for modernisation was made at one go. There is a heavy dose of depreciation on account of this huge investment. Had it been modernisation in installments, then definitely our depreciation would have been much less and the company would have been showing a marginal profit.

For 2011-12, we have projected a modest operating profit of Rs 6 crore. I can improve my efficiency on par with any private sector player, but that will not give me profitability, unless my manpower, which is there at various pockets and is idle, is properly utilised or dispensed with.

Will you come out with more VRS schemes?
The voluntary retirement scheme (VRS) is already in vogue in the company. It cannot be compulsory; it is an option. That is why we incur a loss of about Rs 50 crore every year on extra wages. We have to get rid of 1,000-1,500 people. If, that is achieved, that is the first step for operational efficiency.

What are the expansion plans ahead?
The company is going to double its capacity from the existing 675,000 spindles to 1.35 million spindles. The company board has approved diversifying into technical textiles.

After this it will go to the Board for Reconstruction of Public Sector Enterprises and then to the Cabinet. The entire process is likely to take six months. It will take another 18 months for the projects to mature. These will be done in separate mills — one in Rajasthan and the other in Tamil Nadu.

How much will the expansion plan cost the company?
So far, we have used Rs 1,155 crore, of Rs 4,000 crore we have for the expansion. Technical textiles will involve around Rs 460 crore. This financial year, we will spend around Rs 900 crore. We will raise resources through sale of assets. So far, we have raised Rs 6,100 crore, of which we have spent Rs 2,400 crore on VRS and other compensation to employees.

Some reports say your recent auction of property did not evoke much interest?
No, there was excellent response. Three parties responded to our Ujjain property. On March, 29, 30 and 31, we put our property in Ujjain on e-auction. Our reserve price was Rs 40.90 crore and we got Rs 76.5 crore, a jump of 90 per cent.

Do you have any IPO plans?
It will eventually happen, but you need to do some homework before hitting market. We are on the job.

What is the timeline?
I can't comment unless I have a mandate from the government. But everybody is seized of the issue.