Kolkata/Mumbai: The West Bengal government has asked tyre-maker Dunlop India Ltd to immediately call off the suspension of work at its Sahaganj unit in Hooghly and resolve the issue through dialogue. The unit has 872 permanent and 450 temporary workers.
“Chief minister Mamata Banerjee wants the factory to be opened and talks can go on after that,” state industries minister Partha Chatterjee said after meeting a four-member Dunlop team at the state secretariat, Writers’ Buildings.
The Dunlop management had imposed a “work suspension” notice on Saturday, citing security, law and order problems, and a financial crisis.
The last is the most acute of these issues—there has been no production over the last 10 months and employees have not got paid for the last two. The company, which already owes Rs 10 crore to the power department, has not been able to pay power bills for one-and-a-half months, following which supplies have stopped.
Going by BSE data, Dunlop’s promoters have pledged up to 90% of their holdings with banks and financial institutions. The promoters held a 74.25% stake as of 30 June.
The company has raised money from lenders by offering the Sahaganj unit as collateral. According to a company release, it has invested a huge amount of money for revival of the factory and has raised loans and other economic resources.
“If the losses mount beyond the threshold and the company fails to repay the loans it has availed, the lenders can invoke the pledge and take over the management of the company,” said an investment banker who looks after small and medium companies’ debt restructuring.
Dunlop has not cleared statutory dues of 319 employees who took early retirement after Pawan Kumar Ruia took over from Manu Chhabria in 2005, said Bidyut Raut, the Trinamool Congress-affiliated labour union’s district leader and an ex-employee of the Sahagunj factory. About 328 employees who retired after 2005 have also not received provident fund and gratuity payments, he alleged.
The government has promised to look into the security aspect, but the management was non-committal about opening the factory once the government restored law and order.
“This is not the only criterion for closing down the unit. There are other factors such as financial crisis, failure to procure raw material. We have to discuss all aspects at the board meeting before withdrawing the notice,” said Dunlop director S.K. Pal.
The management wants working capital support from the state government, but Chatterjee has ruled this out. “Let us see what is the status of the company and whether it is in a position to be viable,” said the state industries minister.
Dunlop also wants to set up a 50 megawatts (MW) power project at the Sahaganj unit to revive it. “We are not in a position to manufacture radial tyres. We have suggested diversification, and by selling power, we would be able to recover partly,” said Pal. The state government is not convinced about this strategy.
Dunlop’s turnover declined 80.9% to Rs 9.18 crore for the quarter ended 30 June from the year-ago period. It posted a Rs 0.12 crore loss for the same period.
It has seen four directors resigning in last five months, including chairman Ruia.
Shares of Dunlop on Monday rose 4.94% to close at Rs 14.86 apiece on the BSE even as the benchmark Sensex rose 2%.
The acquisition of Dunlop was a leveraged buy-out funded by a consortium of lenders led by the UK’s Spinnaker Capital Group. Ruia had mortgaged his stake to raise the loan. Though he repaid $92 million (Rs 452 crore today) he had borrowed by taking another loan, Ruia still owes around $120 million to ICICI Bank Ltd.