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REVIVAL OF SICK UNITS

REVIVAL OF SICK UNITS. INTRODUCTION. DEFINITION OF SICKNESS. CAUSES OF SICKNESS. UNFAVOURABLE EXTERNAL ENVIRONMENT. MANAGERIAL DEFICIENCIES. UNFAVOURABLE EXTERNAL ENVIRONMENT. Storage of keys input like power materials.

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REVIVAL OF SICK UNITS

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  1. REVIVAL OF SICK UNITS

  2. INTRODUCTION • DEFINITION OF SICKNESS.

  3. CAUSES OF SICKNESS • UNFAVOURABLE EXTERNAL ENVIRONMENT. • MANAGERIAL DEFICIENCIES.

  4. UNFAVOURABLE EXTERNAL ENVIRONMENT • Storage of keys input like power materials. • Changes and govt. policies with respect to exercise duties, custom duties, export duties etc. • Emergence of large capacity leading to intense competition. • Development of new technology. • Shift in consumer preferences. • Natural calamities

  5. MANAGERIAL DEFICIENCIES • Production. • Marketing. • Finance. • personnel

  6. Tiwari Committee Report • Sickness arises at the time of planning and during implementation • Sickness arises after implementation

  7. SYMPTOMS OF SICKNESS • Delay or default in payment to suppliers. • Irregularity in the bank account. • Delay or default in payment to banks and financial institutions. • Non-submission of information to banks and financial institutions. • Frequent requests to banks and financial institutions to additional credit

  8. Decline to capacity utilization. • Poor maintenance of plant and machinery. • Low turnover assets. • Accumulation of inventories. • Inability to take trade discounts. • Excessive turnover of personnel. • Extension of accounting period. • Resort to ‘creative accounting’ . • Decline in the price of equity shares and debentures.

  9. REVIVAL OF SICK UNITS

  10. When an industrial unit is identified as sick, a viability study should be conducted. VIABILITY STUDY:- viability study generally covers the following: • Market analysis. • Production/technical analysis. • Finance

  11. Environment. • Personnel and organization.

  12. REVIVAL PROGRAMME

  13. The revival programme usually involves the following:- • Settlement with creditors. • Provision of additional capital. • Divestment and disposal. • Reformulation of product-market strategy. • Modernization of plant and machinery. • Reduction in manpower.

  14. Strict control over costs. • Streamlining of products. • Improvement in managerial system • Environmental monitoring • Organizational structure • Responsibility accounting • Management information system • Budgetary control • Workers participation. • Change of management.

  15. SOME TURNAROUND STORIES TVS Suzuki Started in 1987 Was a profit making company But, incurred losses in 1989-90 & 1990-91

  16. Determined to fight competition andimprove performance, the company took a series of steps:- • A six month, week-by-week, cost reduction drive. This resulted in the drop of 30 % in the operation cost. • A massive exercise in value engineering. • Product improvement strategy. • A renewed marketing drive.

  17. Thank you

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