UT Govt shuts down J&K Cements Limited
AC approves disinvestment proposal, says, it was necessitated as the company was not able to sustain and manage its finances properly
Srinagar: The Administrative Council (AC) which met here under the chairmanship of the Lieutenant Governor, Manoj Sinha, approved the proposal for disinvestment of Jammu and Kashmir Cements Limited, an official press release informed Sunday.
It said Rajeev Rai Bhatnagar, Advisor to the Lieutenant Governor and Dr. Arun Kumar Mehta, Chief Secretary, J&K attended the meeting.
The disinvestment in the JK Cements was necessitated as the company was not able to sustain and manage its finances properly and maintain efficiencies of operations over the period of time. The company was also not able to fully exploit the potential and sustain stiff competition in the market despite having dedicated limestone mining leases at its disposal, the official release said.
It said despite of enjoying economy of scales, the company failed to show requisite growth and generate cash flows and operating margins during the last more than two decades.
The company despite having assured demand from government against advance payments has not grown even marginally over the long period of time and has shown sharp decline in its production and revenues from 2012-13 onwards. Managerial and financial inefficiencies, coupled with failure to exploit locational advantage, has made the company defunct further depreciating plant and machinery without any resultant productivity.
The company had not only accumulated losses but was also burdened with liabilities on account of salaries and outstanding wages and payments in addition to default in statutory deductions like CP fund, GST, etc, the press release said.
Earlier also the Administrative Council vide its decision No. 113/15/2021 dated 19.10.2021 had given in-principle approval for complete sale of JK Cements Limited by exploring the option of ascending e-auction and an authorization to utilize 240 kanals of land adjacent to Khrew Plant at Industrial Estate.
The interested bidder should have a minimum net-worth of Rs 250 crore. The interested bidder should have a net positive EBITDA in at least three out of the immediately preceding last five financial years. Eligible entities are permitted to form a consortium to participate in the transaction. The maximum number of members, including lead member, in a consortium can be four, the press release informed.
It said the key principles and actions underlying the recommended disinvestment modality includes 100 percent ownership in JKCL in favour of a private company/consortium. Further all the assets of JKCL on an as-is-where-is basis, along with approvals and licenses (including mining license) will be transferred as part of the share purchase sale.
It was further decided that the Government of J&K will take over all employees of JKCL and the acquirer will be responsible for staffing requirements to get the plant operational. Moreover all legacy and material liabilities will be carved out and assigned to the Union territory.
All the pre-bid requirements including renewal of lease in favour of the corporation, power availability, finalization of accounts and their audits etc. shall be completed before the start of the auction process.
While disinvesting, it shall be ensured that the provisions of Mines and Minerals (Development and Regulation) Act, 1957and rules framed thereunder are not violated in any case. It was also decided that the process of reverse auction will be adopted for the purpose of disinvestment.
The step was expedient as the company has turned defunct for more than two years. The attempts of revival of the company have failed in absence of fund flow that could have paved the way for the revival of the company, the press release said.