Srinagar: After exploring all possibilities for the revival of the Jammu and Kashmir Cements Limited, the Administrative Council (AC) which met here under the chairmanship of Lieutenant Governor Manoj Sinha approved the proposal for disinvestment of J&K Cements Limited (JKCL).
An official spokesman in a statement issued here said that AC expressed the belief that the disinvestment in JKCL was necessitated as the company was not able to sustain and manage its finances properly and maintain efficiencies of operations over time.
It said that 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 AC said that despite enjoying an economy of scale, the company failed to show requisite growth and generate cash flows and operating margins during the last more than two decades.
It said that the company despite having assured demand from the government against advance payments had not grown even marginally over a long period and had rather shown a sharp decline in its production and revenues from 2012-13 onward.
The AC said that managerial and financial inefficiencies, coupled with failure to exploit locational advantage, had made the company defunct, further depreciating plant and machinery without any resultant productivity.
It said that 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 and GST.
The AC said that earlier also the AC vide its decision No 113/15/2021 dated October 19, 2021, had given in-principle approval for the complete sale of J&K Cements Limited by exploring the option of ascending e-auction and authorisation to utilise 240 kanal of land adjacent to Khrew plant at the Industrial Estate.
It said that the interested bidder should have a minimum net worth of Rs 250 crore and a net positive EBITDA in at least three of the immediately preceding last five financial years.
The AC said that the eligible entities were permitted to form a consortium to participate in the transaction.
It said that the maximum number of members including the lead member in a consortium could be four.
The AC said that the key principles and actions underlying the recommended disinvestment modality include 100 percent ownership in JKCL in favour of a private company and consortium.
It said that further all the assets of JKCL on an as-is-where-is basis along with approvals and licenses (including mining license) would be transferred as part of the share purchase sale.
The AC said that it was further decided that the J&K government would take over all employees of JKCL and the acquirer would be responsible for staffing requirements to get the plant operational.
It said that all legacy and material liabilities would be carved out and assigned to the J&K government.
The AC said that all the pre-bid requirements including renewal of the lease in favour of the corporation, power availability, finalisation of accounts, and their audits should be completed before the start of the auction process.
It said that while disinvesting, it would be ensured that the provisions of Mines and Minerals (Development and Regulation) Act, 1957and rules framed thereunder are not violated in any case.
The AC said that it was also decided that the process of the reverse auction would be adopted for disinvestment.
It said that the step was expedient as the company had turned defunct for more than two years.
The AC said that the attempts to revive the company had failed in absence of fund flow that could have paved the way for the revival of the company.
The official spokesman said that Advisor to the Lieutenant Governor Rajeev Rai Bhatnagar and Chief Secretary Arun Kumar Mehta also attended the meeting.