Analysis of sickness in Indian industry

(a case study on anusika industries)

PREPARED BY:
ROHIT MALIK
ROLL NO.01015903909
 About the topic
• Industrial sickness: Just like birth and growth, sickness and death
is an inevitable aspect of trade and industry. An industry
flourishing today may face closure tomorrow while an industry
languishing today may turn the corner and grow rapidly tomorrow,
this is unavoidable in any economy.
• BY THE COMPANIES (SECOND AMENDMENT) ACT, 2002
• Defines a sick company as one:
• Which has accumulated losses in any financial year to 50 percent
or more of its average net worth during four years immediately
preceding the financial year , or
• Which has failed to repay its debts within any three consecutive
quarters on demand for repayment by its creditors.
 Cont…
• Due to the liberelisation of economy competion has increased and industrial
sickness has grown at alarming pace.The causes of industrial sickness can be
categorized into:-
• Internal Causes
• A)Personal constraints
• B)marketing constraints
• C)production constraints
• D)finance constraints
• E)management constraints
• External Causes
• A)improper credit facilties
• B)import restrictions.
• C)change in international scene.
• D)unfavourable government policies
 Cont…
• REHABILITATION OF SICK INDUSTRIAL UNITS
• BIFR directs operating agency to prepare suitable
revival package.
• BIFR sends the revival package to all interested
parties.
• After careful examination of Draft Rehabilitation
Scheme BIFR will sanction the revival scheme
with or without modifications.
• Sacrifices made by various organizations.
Analysis of sickness in anusika industries ltd.
2.1 ANALYSIS OF BALANCE SHEET (`.in lakhs)

As On As On As On
PARTICULARS 31.03.07 31.03.08 31.03.09

SOURCES OF FUNDS

Share capital 280.00 280.00 280.00

Reserve & surplus 165.00 165.00 165.00

Loan funds

Secured loans 0.00 0.00 0.00

Unsecured loans 12.43 11.41 11.30

TOTAL SOURCES OF FUNDS 457.43 456.41 456.30

APPLICATION OF FUNDS

Gross Block 1016.33 1108.15 1109.84

Less: Depreciation 671.87 714.89 753.93

Net Fixed Assets 344.46 393.25 355.92

Capital Work in Progress 0.00 0.00 8.32

Investments 7.94 7.94 7.94

Current Assets , Loans & Advances

Inventories 19.56 15.99 15.58

Sundry Debtors 3.94 6.36 3.23

Cash & Bank Balance 25.22 4.77 1.31

Loans & Advances 17.07 91.03 185.28

Other Current Assets 12.61 17.93 23.93

Total Current Assets 78.40 136.08 229.33

Less: Current Liabilities & Provisions

 Cont…
ANALYSIS OF PROFIT & LOSS ACCOUNT
(`.in lakhs)

PARICULARS Audited Audited Audited

As on As on As on
31.03.07 31.03.08 31.03.09

INCOME

Sales 4.68 0.00 0.00

Other revenue (incl job work) 167.08 192.84 164.69

Total Income 171.76 192.84 164.69

EXPENDITURE

Consumption of raw material 3.91 2.41 1.21

Payment of Employee 33.07 50.68 46.75

Manufacturing expenses 97.30 125.44 99.54

Admn..expenses 8.40 11.64 10.76

Selling expenses 4.62 2.09 1.09

Financial charges 0.53 0.07 0.31

Depreciation 47.08 43.02 39.04

Increase/(Decrease) in Stock (2.83) (0.00) 0.00

TOTAL EXPENDITURE 192.09 235.74 198.70

NET PROFIT/(LOSS) BEFORE (20.33) (42.91) (34.01)

INCOME TAX

Income Tax & Other Adjustments 3.92 (0.62) 6.95

NET PROFIT/(LOSS) FOR THE YEAR (16.41) (43.53) (27.06)

 Cont…
• REASONS FOR SICKNESS
•
• The main reasons for sickness have been identified as under:
• Lack of adequate working capital
• Prolonged labor strike which continued for more than 3 years
• Low capacity utilization due to prolonged strike of workers.
• Roadblock to execute the orders which were sufficient in
hands.
• Heavy burden of interest payments.
 Cont…
• PROPOSED REHABILITATION STRATEGY

• The proposed strategy for revival of the company is as under:

• Settlement with the secured creditor.
• Capital expenditure for repairs / upgradation / replacement of
old plant & machinery.
• Re-start of Operations
• Payment of Other unsecured creditors
• Induction of fresh funds by the promoters.
• Relief’s and concessions from various concerned parties.
 Cont…
Cost of Scheme and Means of Finance

(``. in Lakhs)
1 COST OF SCHEME

Capital Expenditure 50.00

Payment of unsecured creditors * 137.58
Payment of workers dues 3.68
Addl. Working capital requirement (Ist year) 78.74
TOTAL 270.00

2 MEANS OF FINANCE

Promoters' contribution - Equity 100.00

Internal Accruals 170.00

TOTAL 270.00

Cut-Off Date 31.03.2010

 Cont…
• PROPOSED RELIEFS & CONCESSIONS
• FROM FINANCIAL INSITUTIONS / BANK
• FROM THE STATE GOVERNMENT OF RAJASTHAN
• Sales Tax Department, State Government of Rajasthan
• State Electricity Board / Power Supply Company
• From central government.
• Provident fund
• From workers
• From promoters
• CONCLUSION: net worth of the company becomes positive in the first
year of rehabilitation due to induction of fresh funds by promoters and
the entire losses will be wiped out in the second year of rehabilitation.
 objectives
• Primary objective :-
 
i) To analyze the various factors of industrial sickness and to find out the
causes of sickness.
ii) To analyze the impact of remedial measures; adopted by government,
financial institutions and entrepreneurs on industrial growth.
 
• Secondary objective :-
 
(i) To study and analyze the problems being faced by sick entrepreneurs
on causes of sickness especially non–availability of bank credit, quality
control, in–conducive industrial environment etc.
 Research methodology
RESEARCH DESIGN :Exploratory Research Design
DATA COLLECTIONS:primary and secondry data
LIMITATIONS:Not able to cover the Practical
aspect i.e the actual working of the company
(because in the books, the net worth may
become positive but in actual it suffers from
losses).
 findings
• The study findings demonstrate that most of the
entrepreneurs use intermediate and traditional
technology of production. They also face problems in
getting timely supply of raw materials since they do not
have institutional arrangements for raw material supply.
More than half of the entrepreneurs have received
financial assistance; however, there is gap between
amount of loan applied and loan received. Again, most of
the entrepreneurs do not advertise their product and
conduct marketing research. Thus, they face marketing
problems.
 recommendations
• To improve standard of living workers should be enabled
to move from lower value added to higher value added
jobs.
• Education should focus on fostering a culture that
encourages innovation and manufacturing so that people
get trained for alternate avenues of employment.
• To motivate the first generation entrepreneurs and to
encourage industrialization, management institutions
and government must extend help in marketing the
products.
 conclusions
• Conclusions are based on analysis, observations and results. from
this study following conclusions can be drawn:-
 
a.)The main reason for sickness of a firm is non-availability of working
capital.
 
b.)If proper relief’s and concessions are timely granted by various
financial institutions many sick units can be prevented from shutting
down.
 
c.)Only those sick units get revival package which can be rehabilitated
within a specified period of 7 years.
 bibiliography
• BIBLIOGRAPHY
• Sick Industrial Companies, by P.S
Kaicker,Taxman.
• Sick Industrial Companies,6th edition , by H.P.S
Pahwa,Bharat.
• Mergers and Amalgamations, Takeovers and
Corporate Restructure, by K.R Sampath, Snow
White.
Thank u all…