Urban ministry blocked plan-1 of Hindustan Prefab’s revival

Urban ministry blocked plan-1 of Hindustan Prefab’s revival
The Financial Express, August 25, 2009, Page 12

Praveen Kumar Singh, New Delhi

Hindustan Prefab Ltd (HPL), which was given a Rs 128-crore revival package on Thursday, could have been merged with profit-making National Buildings Construction Corporation (NBCC), but for the urban development ministry’s objection to a proposal by the Board for Reconstruction of Public Sector Enterprises (BRPSE).

The ministry of urban development, which administered the sick company till the end of 2007-08, ruled out the merger fearing that NBCC may not be able to bear the additional financial burden. NBCC was earlier a sick company too, but had staged a turnaround at the beginning of the decade.

Hindustan Prefab, now under the ministry of housing and urban poverty alleviation, was referred to the BRPSE in 2006. It had accumulated losses of more than Rs 147 crore and a negative net worth of over Rs 141 crore at the end of March 2009, while on the other hand, NBCC had earned a net profit of Rs 159.16 crore during 2008-09 and had a net worth of Rs 335.32 crore at the end of March 2008.

After the merger proposal failed to be implemented, BRPSE, in February 2009 suggested the conversion of the government loan of Rs 128 crore into equity. In addition to this, it asked for an interest-free loan of Rs 97.2 crore to enable HPL to set up a new plant in Delhi . But again, neither the ministry of finance nor the ministry of urban development had accepted the second part of the fresh proposal.

“North Block did not want to give any fresh funds to the company. The ministry said it could only waive the old loans and the company has to depend on other sources for fresh funds. Also, the urban development ministry did not want to do away with the land identified for the new plant. So the new proposal was accepted in parts. The government has already approved the accepted part of the conversion of loan into equity,” said a senior official of BRPSE, involved in making the recommendations. “However, we feel it would have been better if HPL was merged with NBCC, even though the ministry of housing and urban poverty alleviation is now confident of reviving the company by giving it more orders,” he added.

With the Cabinet’s decision on Thursday, BRPSE is keeping its figures crossed over the future of HPL. “We wish the company return to profits soon, with an existing order book of Rs 2,000-crore,” the official said. For 2009-10, HPL is expected to reduce its net loss to Rs 2.09 crore. During 2008-09, the company had incurred a net loss of Rs 8.69 crore, with a sales turnover of Rs 150 crore.