Swc Suffers Rs 2cr Loss In July On Prodn Stoppage

At a time when Manu Chhabria's Shaw Wallace and Co (SWC) is struggling to come out of its financial crunch by putting in place a Rs 400 crore revival plan, the company has incurred a hefty Rs 2 crore loss in July alone owing to disruption in production at its distilleries.

The "pen-down, tool down'' agitation by its employees has had a telling effect on the company, sources told Business Standard yesterday.

The total number of cases whose despatches have been affected owing to the production stoppages stand at a whopping 70,000 cases, the sources said.

SWC officials were not available for comment on the issue.

However, it is understood that the company management has raised the issue strongly before the Company Law Board (CLB) at its hearing last week.

SWC has said that if the production stoppages and employees agitation continued, it would be extremely difficult to revive the company even with the funds infusion by way of the rights issue and the external commercial borrowings (ECB).

"If there is no production, how can there be a case for revival?'' sources pointed out.

SWC, on July 28, also filed before CLB the applications for its Rs 150 crore rights issue and the $10 m ECB.

The CLB is believed to have taken note of the company's arguments in the light of the stoppages caused by the employees agitation and the principal bench is reported to have told the employees' counsel to advise his clients to desist from such actions, the sources said. The agitation has taken the forms of either a work to rule, or a stoppage of overtime affecting despatches of the cases or taking of longer time for maintenance work, the sources said.

The worst affected was Maharashtra Distilleries Ltd, followed by Pampasar Distilleries and Bengal Distilleries, with production being affected in all the three locations.

The SWC management is seeking to highlight the fact that Chhabria, as the major stakeholder, is ready to pump in his share of the funds required for the rights issue, as well as any renunciations of rights which may come about. Besides, Jumbo has also arranged for the $10 m ECB. All this, the management seeks to prove as part of its genuine intentions to turn SWC around. The production stoppages and the consequent losses are, therefore, critical to the turnaround of the company, which posted a slender net profit of just Rs 5.21 lakh for 1995-96.

The application from the employees side, of appointing more government directors on the SWC board would also come up for discussion before CLB at a future date.

The company has also progressed on the divestment front with Henkel-Spic, which emerged as the highest bidder for the Consumer Products Division (CPD) of the company conducting a due diligence exercise of the division's books before the formal takeover.

Thereafter all clearances would be taken and the funds would then be deposited in an escrow account.