• PAGE ONE
• INDEX
• HOME

SIV Ind: Pushed into red by green issues

L.N. Revathy

COIMBATORE, Aug 15

SIV Industries - hitherto considered a major producer of rayon and viscose staple fibre (VSF) in the South - is dogged by complexities and environmental issues today.

Apart from these issues, the sluggish market conditions for rayon and VSF, prolonged closure of the pulp plant due to environment-related problem, import of wood pulp for processing and under-utilisation of the plant capacity have led to an erosion in it s peak networth by over 50 per cent.

If only the company had, besides continuing the programmes for modernisation, de-bottlenecking, revamping and upgrading its technologies, initiated corrective measures in time by adhering to the pollution control norms as prescribed by the Tamilnadu Poll ution Control Board (TNPCB), it would not have had to fight this tough battle today.

Established over four decades ago, SIV Industries, from manufacturing and marketing of rayon wood pulp, rayon yarn, VSF and industrial chemicals, had diversified into a number of other areas such as oil feed chemicals, seeds and agro products, edible oil , tissue culture and engineering.

It was a dividend paying company until the tides turned against it in 1995-96.

Between 1987-88 and 1995-96, its bottomline swelled by almost 9 times - from Rs 7.21 crore to Rs 63.80 crore. Turnover witnessed a steady rise to touch Rs 421.34 crore in 1995-96. Improved operating efficiency, favourable market conditions, particularly for wood pulp and VSF, and the income from deployment of global depository receipts (GDR) funds (issue made in 1994-95), contributed to its good performance.

The company undertook a massive programme for modernisation and upgradation of the plants in 1994-95, not anticipating the rough weather.

Trouble started soon thereafter, and by the end of March 1999, the company witnessed a steep erosion of over 50 per cent of its peak networth. It has since turned into a potentially sick unit as defined under the provisions of the Sick Industrial (Speci al Provisions) Companies Act (SICA).

The first blow was delivered on May 9, 1995, when the TNPCB passed an order under Section 33 A of the Water (Prevention and Control of Pollution) Act 1974, directing closure of the pulp plant and disconnection of power and water supply on the ground that the treated effluents discharged into the river sources did not conform to the standards prescribed by it.

Though the power supply was restored within 24 hours following a writ petition filed by the Bhavani River Protection Joint Council, the Madras High Court, in November 1996, directed the company not to discharge the treated effluents into the river sourc es from January 1997.

Accordingly, the pulp plant was closed from January 12, 1997 and the production of rayon and VSF plants were also suspended within 10 days.

Sales and profits were adversely affected that year. Turnover dipped to Rs 291.80 crore from Rs 421.34 crore in 1996, and the company incurred a net loss of Rs 31.64 crore against a profit of Rs 70.80 crore at the end of the previous fiscal, the reason being suspension of production for nearly three months (January-March 1997).

The market for pulp and VSF turned sluggish around this time. Realisation plunged, but interest expenses soared because of inventory build-up and intermediate products caused by suspension of production.

The company filed a Special Leave Petition with the Supreme Court seeking permission to operate the plants and went ahead with the installation of the Rs 50-crore effluent treatment plant, with technology from Linde, Germany.

By this time, the crisis had blown out of proportion. SIV was directed to discharge its treated effluents only on land and not into the river. The financial constraints forced the company to revise its mega modernisation plan by defering some of the proj ects.

The pulp plant continued to remain closed throughout 1997-98 and the rayon and VSF plants also could not operate till the end of July 1997. Though restarted in August, these plants could not run for long. They were shut down following labour unrest.

Following the completion of work within the pulp plant battery limits which included source controls as also pipeline work for land irrigation, the clearance for restarting was received from the TNPCB and the operations recommenced from June 1999.

The economic downturn, lacklustre domestic demand in the textile sector, steep increase in the price of imports of blended textiles from South-East Asian countries coupled with stagnant export growth resulted in reduced offtake of VSF. Because of funds c onstraint, the plant utilisation capacity fell.

To overcome the cash flow problem, fresh infusion of funds and restructuring of debts were considered necessary. The company submitted a fresh debt restructuring proposal to the financial institutions and banks for approval late last year. This is still pending before the FIs (ICICI is the lead institution).

It had also proposed and made a 1:1 rights issue to meet its long-term fund requirements.

Though it looked like the company was climbing out of the hole, it did not last long. Power charges had fallen due and the company had prayed for time to settle them. The company has got a respite for the time being.

Is there light at the end of the tunnel for SIV?