ITI Ltd seeks Rs2,000 crore aid from government

ITI Ltd seeks Rs2,000 crore aid from government

Bangalore: Public sector undertaking ITI Ltd (formerly known as Indian Telephone Industries Ltd), which has not been profitable since 2001, is seeking a new Rs2,000 crore government bailout.

The funds are being sought to wipe out accumulated losses of Rs2,225 crore and to obtain working capital for telecom equipment manufacturing. According to a company official who did not wish to be named, a committee has been set up by the Centre to finalize the package.

Any “delay in the approval of the revival package will affect our ongoing projects. We have orders worth Rs2,800 crore on hand, but insufficient working capital," claimed the ITI official. The loss making company has set a sales target of Rs4,770 crore for 2007-08, which is 150% more than what it sold last year. But through September, ITI has achieved sales of just Rs800 crore.

The new bailout demand comes just three years after the Union government gave Rs1,025 crore in financial aid to ITI. The government had infused Rs200 crore in equity, Rs458 crore for a voluntary retirement scheme, Rs50 crore for capital expenditure, Rs93 crore to clear provident fund dues, and the rest as working capital.

ITI’s losses are at Rs405 crore on sales of Rs1,818 during 2006-07, when it contributed Rs153 crore toward duties and taxes. According to the company’s auditors, ITI’s network had completely eroded by March due to the losses.

The official claimed the new bailout would help make ITI independent of projects from public sector telecom operators, Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), which account for more than 80% of ITI’s total orders.

Prithipal Singh, former chairman and managing director of BSNL, says ITI has been surviving only on BSNL and MTNL work. “ITI has been unable to get significant orders from the private players. No financial package will help ITI unless they build their own strength to survive independently," he added.

Commenting on earlier attempts by the government to help revive ITI, Singh said: “The aid could’ve been leveraged better. It worked well only in short-term revival, but not in the long run. Unless the new financial aid comes attached with conditions on how it is utilized, I am afraid this, too, may go up in smoke."

ITI is executing a Rs328 crore order for 2.1 million lines of wireless local loop. It also has to complete an order for five million lines of GSM from BSNL. However, the same ITI official complained that debtors, including BSNL and MTNL, owe ITI Rs291.95 crore for the past three years.

The Union government owns 92.87% of ITI with Karnataka owning 0.11%. The rest is held by ordinary shareholders. ITI has six manufacturing plants spread across Bangalore, Mankapur, Rae Bareli, Naini, Srinagar and Palakkad.

ITI, which used to have 24,500 employees a decade ago, had 13,415 through March, most of them leaving through voluntary retirement schemes.

ITI was formed in 1948 and, even today, about 50% of the national telecom network uses equipment made by the company. However, it now faces stiff competition from Chinese companies such as Huawei Technologies Co. Ltd and ZTE Corp., which earned revenues of $197 million and $577 million, respectively, for 2006-07 from Indian customers.

“With the network needs escalating rapidly across the country, both private and state-owned operators are turning to the likes of Huawei and ZTE who ensure faster roll-out than ITI," says Parikshit Kandpal, a stock analyst at Sushil Finance Pvt. Ltd.

Shares of ITI closed at Rs57.65 on the Bombay Stock Exchange on Monday, up 1.59%. The shares had traded as low as Rs35.85 on 24 August.