AC approves disinvestment proposal for JKCL

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Cement Factory
File Photo | Cement Factory

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 the Lieutenant Governor, Manoj Sinha, approved the proposal for disinvestment of Jammu and Kashmir Cements Limited (JKCL).

Rajeev Rai Bhatnagar, Advisor to the Lieutenant Governor and Dr Arun Kumar Mehta, Chief Secretary, J&K attended the meeting.

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The disinvestment in 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.

In spite of 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.

The company, despite having assured demand from the government against advance payments, has not grown even marginally over the long period of time and has rather shown a sharp decline in its production and revenues from 2012-13 onwards. Managerial and financial inefficiencies, coupled with failure to exploit locational advantage, have made the company defunct, further depreciating plant and machinery without any resultant productivity.

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The company had not only accumulated losses but is 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.

Earlier also, the Administrative Council vide its Decision No. 113/15/2021; dated 19-10-2021 had given in-principle approval for the complete sale of JK Cements Limited by exploring the option of ascending e-auction and 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 the lead member, in a consortium, can be four.

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Key principles and actions underlying the recommended disinvestment modality include 100% 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 the 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 the Mines and Minerals (Development and Regulation) Act, 1957and the rules framed there under are not violated in any case. It was also decided that the process of reverse auction will be adopted for the purpose of disinvestment.

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