Revision of the terms and conditions of the rehabilitation package for Hindustan Organic Chemicals Limited

The Cabinet Committee on Economic Affairs has approved the proposal of the Ministry of Chemicals and Fertilizers to revise the following terms and conditions of the revival package, approved in 2006, for the Hindustan Organic Chemicals Limited (HOCL):

(a) Postponement of the redemption of shares to the Govt. of India, worth Rs. 270 crore (total 27 crore shares, 8 percent Redeemable Non-Cumulative Preference Shares, each of Rs.107/-, issued in favour of the President of India, from the financial years 2011-12 to 2015-16 onwards in 4 equal installments of 25 percent each;

(b) Extension of Government of India guarantee for Rs.100 crore for a period of 5 years that is upto 28 August 2017. The Government guarantee will continue to be valid even on referral of HOCL to the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies Act (SICA).

It is expected that these measures will help HOCL in their revival effort in the short term.

Background:

HOCL has two units at Rasayani (Maharashtra) and Kochi (Kerala), manufacturing phenol, acetone, formaldehyde, nitrobenzene, aniline, nitro toluene, acetanilide, hydrogen peroxide, etc.

The company, due to continuous losses, was registered with the BIFR as a sick company in January 2005. Subsequently, a rehabilitation proposal was approved and implemented by the Government of India during 2006-07.

As a result of the implementation of the rehabilitation package, the company made a profit of Rs. 17.04 crore during 2006-07 and Rs. 13.61 crore in 2007-08 and came out of the BIFR in May, 2008. However, thereafter, the financial position of HOCL has not been encouraging over the years except for 2010-11 when it made a profit of Rs 25.72 crore The company suffered a loss of Rs. 137.43 crore during 2012-13. As on 31.03.2013, HOCL has an accumulated loss of Rs. 528.27 crore, and as a result, the net worth has eroded to minus Rs. 128.50 crore.