The promoters of Hinduja Foundries have said they don't have any intention of letting the company become unprofitable.
The comments come at a time when the company was referred to BIFR.
Addressing the shareholders at the company's AGM today, Company Chairman R Seshasayee, who also represents the promoters -- Ashok Leyland and Hinduja Automotive -- said that the company was impacted due to three issues.
First the external, which relate to market conditions and power issue in the state of Tamil Nadu and Andhra Pradesh. The second factor relates to internal processes, production and quality and third factor was one time charge related to VRS and writing off loss as way of Bad debts.
It may be noted, the company's accumulated loss is around Rs 291 crore as on September 30, 2012, which is 50% of the networth of the company.
"It is due to mandate and due to compliance we have reported to BIFR. It is not the intention of promoters to go in any form of sickness. We (the promoters) will ensure that the company will get all support including people and money," said Seshasayee.
He added that the promoters have committed to infuse around Rs 300 crore, of which around Rs 150 crore is already infused another Rs 150 crore will be infused as and when required.
On what went right and wrong, Seshasayee said that the company went for large expansion in Sriperumbudur, with the intention of moving to the new unit to become a global auto supplier. "This unit is a gold mine," he said.
On what went wrong, he said the stablisation of production, underestimating the learning of new products, process control in shop floor resulted in physical inventory and finally restructuring cost of VRs due to excess manpower resulted in lower productivity at Ennore.
"Still the unit has low productivity", he added.
The company has to write off around Rs 125 crore, of which around Rs 83 crore was written off due to difference stock, VRS amounted around Rs 21 crore and unrecoverable bad debts of Rs 21 crore, said B Swaminathan, managing director, Hinduja Foundries.
"We have appointed McKinsey to help the company address various operational issues".
He added, material cost increased to 52% from 46%, power cost was up by 40% and these increases could not be passed on to the customers, who are mainly automobile customers.
Swaminathan noted, after reporting positive growth, industry has reported negative growth in first half of 2012-13. M&HCV down by 13%, tractor sales down by 10%, construction industry down by 24% and passenger segment down by 7%.
He added the new mission of the company is to look at integrated turnaround programme, reduce rejection, control product mix and cost, business model to ensure long term sustained profit along with increased throughput.
