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Home arrow Automotive arrow Union Cabinet approves revival of Scooters India through JV partner induction
Union Cabinet approves revival of Scooters India through JV partner induction Print E-mail
Written by Anand   
Friday, 20 May 2011
New Delhi: The Union Cabinet today approved revival of Scooters India Limited (SIL), Lucknow, which manufactures and sells three wheelers under the brand name of Vikram, through induction of a joint venture partner.

It has been proposed to revive the company through induction of a strategic partner by offloading the entire Government equity of around 95%. The balance 5% equity will remain with banks, financial institutions, corporate bodies and others.

A resolution will be introduced in Both the Houses of Parliament for authorizing the Government to identify and induct a strategic partner through Department of Disinvestment for SIL and to give effect to the terms and conditions of such strategic partnership, as decided mutually by the Government and the strategic partner so identified.

The entire Government equity will be transferred to a suitable identified strategic partner through the Department of Disinvestment.

There will be a Continued extension of the salary support and the in-principle approval of cleaning of the balance sheet at the time of seeking final approval of induction of the selected/identified strategic partner.

Scooters India Limited has been recording operational losses since 2002-03 and net losses since 2006-07. This is mainly on account of its inherent inefficiency and low productivity as compared to other players in a highly competitive three-wheeler market.

According to the Ministry of Heavy Industries & Public Enterprises, SIL also suffers disadvantage of its old plant, machinery, lack of technology, aging workforce, poor systems etc. It is not even able to meet the liabilities for the salaries and statutory dues of its employees, which are being provided by Government as non-plan loans. In 2008-09, its net worth was fully eroded and the company as per the audited accounts for the year ended 31-03-2008 and 31-03-2009 became sick in terms of Board for Reconstruction of Public Sector Enterprises (BRPSE) guidelines and Sick Industrial Company Act (SICA) respectively.

After detailed analysis of all the possible available options, in order to ensure the revival of the company and its long-term viability, BRPSE recommended the induction of a joint venture partner.

This is being done to arrest further drain of public money and also ensure economic growth of the company and its employees.

Rajkot-based Atul Auto, a manufacturer of front engine three-wheelers, is willing to acquire the 95 per cent stake in SIL. The acquisition will be funded through internal accruals and debt. The company has a cash reserve of about Rs 25 crore and has been approached by many private equity firms. The company plans to invest in Scooters India's technology and expand capacity.

 
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