VRS loan weight breaks engineering firm’s back

VRS loan weight breaks engineering firm’s back
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First Published: Fri, Feb 02 2007. 02 41 AM IST
Updated: Fri, Feb 02 2007. 02 41 AM IST
New Delhi: The Union government has been told that it may have to spend a Rs1,000 crore if it wants to revive Bharat Heavy Plate and Vessels Ltd (BHPVL), a public sector engineering, procurement and construction company.
BHPVL, whose clients include refineries and the power, defence and pharmaceuticals sectors, has an annual turnover of Rs114 crore.
Engineers India Ltd (EIL), one of the two government-owned units charged with the task of turning around BPVL, has come up with this estimate as part of its due diligence.
The other company , Bharat Heavy Electricals Ltd (BHEL), is the lead company for BHPVL’s revival. This is because there is a synergy in the product portfolios of both companies.
BHPVL, which has the technology and expertise to manufacture equipment for nuclear power plants, is also expected to help BHEL’s plans to cater to the nuclear power generation business.
The funds — nearly 10 times BHPVL’s annual revenue —if approved, will be used primarily to clean up the company’s balance-sheet by paying off costly loans.
While a major part of the proposed bailout package will be used for a one-time settlement of bank loans, the remaining funds will be used to retire government loans, arrange working capital and upgrade technology.
“If the interest burden is taken care of, the company’s turnaround can take place this year itself. The restructuring plans are not yet final, but the process is moving in the right direction,” said Om Prakash, BHPVL managing director.
While BHPVL has been able to rustle up a healthy Rs300 crore worth of orders in this fiscal, it has been weighed down by the high-interest burden accruing from loans taken in 2002-03 to finance its voluntary retirement package.
“If the high-interest burden is not taken into account, we are still very efficient,” said Prakash.
The two would-be saviours of BHPVL are part of a group of profitable public sector units (PSUs) tasked by the government to help out other ailing PSUs.
Of the two, BHEL is among a group of eight particularly robust PSUs.
The others are Oil and Natural Gas Corp., National Thermal Power Corp., Gas Authority of India, Hindustan Petroleum, Bharat Petroleum, Steel Authority of India and Indian Oil.
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First Published: Fri, Feb 02 2007. 02 41 AM IST
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