NTC will hive off 18 sick mills to special arm, shut down 12

State owned National Textile Corporation (NTC) has decided to set up a special purpose vehicle (SPV) for 18 of its sick mills in a bid to spin out losses.

State owned National Textile Corporation (NTC) has decided to set up a special purpose vehicle (SPV) for 18 of its sick mills in a bid to spin out losses. The public sector undertaking (PSU) will form joint ventures (JVs) with a private company or consortium, which would entail the company to put in capital for modernisation and expansion of the mills. The expression of interest (EoI) will be invited tomorrow.

“The proposal for the SPV was drawn up for us by consultancy firm Deloitte Touche Tohmatse and recently approved by the Group of Ministers (GoM) on NTC headed by Union agriculture minister Sharad Pawar. According to the terms of the SPV, NTC will have 51 per cent of the SPV’s share capital while the balance would be with the private company,” said NTC chairman and managing director K Ramachandran Pillai. He added that the PSU may consider restricting itself as a sleeping partner if the private partner so demands.

“We dont mind handing over management of the mills to the private partner, provided there are no legal hurdles in the process,” Pillai said. “We will have only 40 mills with us, of which 18 will be with the SPV. We wish to close down another 12 mills as it has been found that there is no scope of a turnaround there.”

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NTC will transfer assets in the mills to the SPV either through outright sale or on long-term lease. However, no stripping of assets would be allowed and the existing workforce would be offered VRS or retained. The existing combined employee strength of the mills is about 9,000.

The private partner must have five years of manufacturing experience in any industry and must be making profits for the last three years as a pre-qualification.

Out of the 18 mills on offer, 10 are in Maharashtra (four in Mumbai alone) and two each in West Bengal and Tamil Nadu.

NTC, which once boasted 119 mills, has been in the red for more than three decades. It has already shut down 65 mills and handed over two to the Pondicherry government.

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The PSU is carrying out modernisation of 22 mills on its own at a cost of Rs 530 crore while 12 mills would be put on the block soon.

NTC has allowed 58,000 workers to opt for the VRS and its wage bill has come down from Rs 480 crore to Rs 100 crore in the space of 36 months.

The fortunes of the company saw a turnaround when five mills in Mumbai were sold for over Rs 2,000 crore between March and July 2005.

With two more mills in Mumbai with an area of 26 acres on the block, Pillai expects another RS 3,000 crore soon.