Date:16/05/2006 URL: http://www.thehindubusinessline.com/2006/05/16/stories/2006051605470100.htm

Back Amul may become producer company

Harish Damodaran

First board meet post-Kurien era tomorrow

Different mould
Under the Companies Act, there are no limits to number of members.
More flexibility in investment in other firms, formation of subsidiaries.
Possible to raise more borrowings from banks for expansion.

New Delhi , May 15

In what could be its first major initiative after the exit of Dr Verghese Kurien, the Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF, better known as Amul) is set to become a producer company. The proposed transformation, from a cooperative to a company under Section 581B of the Companies Act, is expected to be discussed at the Federation's board meeting on Wednesday.

"There is already a thinking on this line and it may feature at the meeting. But the final decision will have to be taken at next month's annual general meeting," officials at GCMMF told Business Line. The Wednesday's board meeting would be the first-ever since the election of Mr Parthibhai Bhatol as the new GCMMF Chairman on April 26, following the end of Dr Kurien's 33 year-long tenure.

The Rs 3,600-crore GCMMF is now a cooperative registered under the Gujarat Cooperative Societies Act, 1961, which is seen as being very restrictive. "The State Government's permission is required for everything now, from opening of offices in other States to investment of surplus funds, issue of bonus shares, election of Chairman and appointment of statutory auditors. It gives lot of scope for official interference," the officials said.

More liberal

The Companies Act, which is a Central legislation, is comparatively more liberal, especially since the passing of an amendment in 2002 enabling creation of `producer companies'. These are akin to private limited companies, though in this case, there are no limits to the number of members. Moreover, voting rights are based on the cooperative principle of one man-one vote and not the extent of shareholding as in normal private or public limited companies.

"A producer company will have more flexibility in so far as investment in other companies and formation of subsidiaries is concerned.

"Also, since shares can be attached, it would be possible to raise more borrowings from commercial banks and other institutions for expansion of business," the officials added.

Shares not transferable

At the same time, the shares of the producer company are not transferable to non-members and, for that reason, cannot be traded on a stock exchange.

"We may at a future stage even consider issuing non-voting shares to attract outside investors.

"But the current law does not allow producer companies that option as of now", the officials pointed out.

Whichever way things move, one thing seems certain: GCMMF in the post-Kurien era is headed for a different organisational mould.