DISINVESTMENT IN JESSOP & CO LTD.

DISINVESTMENT IN JESSOP & CO LTD.

Jessop & Co. Ltd. (JCL)  was  nationalized  in  1973 as  it was  incurring losses. Subsequent  to nationalization also, the company continued to incur losses except in a few years it earned profit. The performance of the company in the last few years are given below:

Year
Profit After Tax(Rs. crore)
1998-1999
0.70*
1999-2000
(-) 43.92
2000-2001
(-) 48.77
2001-2002 (up to September 2001)
(-) 21.19

*Includes adjustment relating to waiver of interest

The accumulated losses and the networth of the company as on 31.3.2001 and 30.9.2001 are:

(Rs. crore)

As on Networth Accumulated Loss
31.3.2001 (-) 270.57 351.18
30.9.2001 (-) 290.38 372.37

Government has made several attempts in the past since 1986 to revive the company through restructuring. The details of reliefs and concessions given by the Government in the past are:

(Rs. crore)

Year of financial restructuring
Fund based restructuring
Non-fund based restructuring
Total
1986
-
52.39
52.39
1997
54.00
241.55
295.55
1997-98 to 2001-02 (January 2002)
118.06
-
118.06
Total
172.06
293.94
466.00

In spite of the huge infusion of funds and financial restructuring, the company could not be revived.

Since JCL is a sick company under the purview of BIFR, BIFR also made attempts to revive the company, but ultimately in August 2000, it declared the revival scheme as having failed and asked the Operating Agency to explore the possibility of changing the management.

The Operating Agency issued an advertisement in September 2000. That did not yield any proposal for reviving the company.

Therefore, as  a final  attempt  to  revive  the  company,  Government  started  the process of disinvestment in JCL. Government  approved  fresh  restructuring  proposal (both  cash  and non-cash based) involving approximately Rs.203.82 crore. But, as per the computation made by the Advisor (M/s A F Ferguson & Co.), the networth of the company as on 31.3.2002 even after the financial restructuring by Government would likely to be Rs. (-) 17.87 crore.

Government received two financial bids for 72% equity stake in JCL. The bid of M/s Ruia Cotex Ltd. amounting to Rs.18.18 crore was more than the reserve price of Rs.12 crore for 72% equity shares.

Government on 27.2.2002 decided to accept the financial bid of M/s. Ruia Cotex Ltd. for acquiring 72% stake in the equity of JCL for Rs.18.18 crore. 

Since Jessop & Co. was under the purview of BIFR, BIFR was approached for seeking its approval to the proposal of induction of the Strategic Partner.  In September 2002, BIFR clear the revival scheme through induction of strategic partner selected by the Government.  However a writ petition was filed by Jessop & Co. Ltd. Staff Association in the Kolkata  High Court, the judgement  for which had  been reserved by the Court on 15-11-02 was given on 28 March 03