SICKNESS

INTRODUCTION:Industrial sickness means when an industrial company

which has at the end of any financial year accumulated
losses equal to or exceeding its entire net worth and has
also suffered cash losses in such financial year and the
financial year immediately preceding such financial
year.
Industrial sickness means a company failed to repay its
debt within any three consecutive quarters on demand
for repayment by its creditors

CAUSES OF INDUSTRIAL
SICKNESS

External causes
Internal causes
External causes:

1.Power Cuts:
- lack of power electricity support
- shortage in electricity

CONTD
2. Erratic supply of inputs:
- shortage of raw material.
- lack of transportation facility.
- high price.
3. Demand & credit restraints:
- no equal balance of demand and supply and lack
of credit facility.
- lack of credit facility.
- storage expanses.
- chance of out of fashion.

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4. Government policy:
- change in government policy.
- lack of government support.
- high authority to large unit.

Internal causes:
1.Fault at the planning & construction stage:
- wrong location area
- absence of market analysis.
- unbalance capital structure.
2. Financial problem:
- unable to repay payment.
- lack of financial support from bank & institution.

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3. Defective plant & machinery
- lack of technical & professional skill
- lack of technology
- in efficient in machine.
- high maintenance.
4. Entrepreneurial incompetence
- lack of knowledge of market
- lack of efficient professional skill
- lack of innovation

SYMPTOMS OF SICKNESS
DELAY OR DEFAULT IN PAYMENT TO SUPPLIERS, BANK AND FINANCIAL
INSTITUTIONS

IRREGULARITY IN BANK ACCOUNT

ACCUMULATION OF
INVENTRIES

DECLINE IN
CAPACITY
UTILIZATION

DECLINE IN THE
PRICE OF EQUITY
SHARE

DECLINE IN THE
PRICE OF
DEBENTURES

REVIVAL OF SICKNESS
When an Industrial Unit is identified as sick a viability
study should be conducted to assess the unit, it covers:
Market
Operations
Finance
Human Resource
Environment
The viability study may suggest one of the following
measures:
Debt restructuring
Infusion of funds
Replacement of existing management

REVIVAL PROGRAMME
Settlement with creditors
Disinvestment and disposal
Strict control over costs
Streamlining of costs
Improvement in managerial systems
Workers participation
Change of management
Merger with a healthy company

HINDUSTAN MOTORS
Maker of Ambassador saloon, once the power symbol in
India is set to declare itself sick.
Revenue from its flagship product Ambassador tumbled
Slow to respond to aggressive competition from
multinational players such as Suzuki and Hyundai due to
its design which has remained virtually unchanged for
over 6 decades
It had a negative net worth of Rs. 36 crore on June 30th
2013
Board of Industrial and Financial Reconstruction
(BIFR)
A central Govt. agency that helps restructure bankrupt
companies or close down sick unit.
HM is the third automobile company to report in BIFRs
door after PAL, the maker of Premier Padmini and FIAT
India.

REMEDIAL

Chennai Plant is being planned to turn in to a

separate entity.
The Chennai unit does contract manufacturing for
auto giants such as
Mitsubishi and Isuzu.
It also intends to bring in foreign investment for its
Chennai and West Bengal units.
It recently launched the BS-IV Ambassador Encore
and is developing a sub-4 metre version.
Besides Ambassador, HM also has Winner trucks in
its portfolio.
The company management says overall vehicle sales
would increase to 7,500 units this year.

Magnitude of industrial sickness

in India
Industrial sickness is growing at an annual
rate of about 28% and 13% respectively
in terms of No. of units and out standing
number of bank credit.
It is estimated that as of today there are
more than 2 lakhs sick units
with an outstanding bank credit of over
Rs7000crore
nearly 29000 units are added to sick list
every year.

Causes of Industrial SicknessExternal

Internal

Causes

Causes

1)Govt. policy

1)Out dated
Technology

2)Erratic Supply of
Inputs

2) Financial Problem

3)Demand & credit

restraints

3) Management
problems

4)Technological
Factors

4) Labour Problem

5)Power Cuts

5) Marketing &
Sickness

consequences of industrial sickness

set-back to employment
Fear to industrial unrest
Wastage of resources
Adverse impact on related units
Adverse effect on investors &entrepreneurs
Losses to banks and financial institutions
Loss of revenue to government

Remedial Measures
Steps taken by commercial banks:
provide working capital assistance
Recovery of interest at reduced rates
Suitable moratorium on payment of interest
Freezing a portion of outstanding in the accounts
No. of organizations or agencies were set up:
- sick industrial undertaking cell
- state level inter-institutional committees
- standing coordination committee
- special cell rehabilitation finance division of
IDBI

 POLICY FRAME WORK OF THE GOVT. :

REMEDIAL MEASURES
Ministry were given more responsibility
They were responsible in detection of sickness at
the early stage
Policy frame work was framed in 1981 & reviewed
in 1982
Concessions by the govt. :
No. of concessions was given by the govt.
Margin money scheme was introduced
Excise loan were provided

REMEDIAL MEASURES
THE INDUSTRIAL Investment BANK OF
INDIA:
-Establishment of Reconstruction
Corporation of India
- to provide all kinds of assistance
- IRCI converted to IRBI (industrial
reconstruction bank of India)
BOARD FOR INDUSTRIAL & FINANCIAL
RECONSTRUCTION
-Rehabilitation package