ADDITIONAL INFORMATION ON CORE HEALTHCARE LTD
Friday, June 04, 2004
  GREAT BANK ROBBERY ARTICLE ON CORE HEALTH CARE AS APPEARING IN INDIAN EXPRESS ON 7-12-2002
annexure : article of GREAT iNDIAN BANK ROBBERY APPEARED IN INDIAN EXPRESS ON 7-12-2002 FRONT PAGE

THE GREAT INDIAN BANK ROBBERY - 7



Maker of IV fluids drains banks, now needs a drip


Core’s diagnosis is disturbing but it’s putting up a brave face


JYOTSNA BHATNAGAR & SAMAR HALARNKAR



AHMEDABAD, DELHI, DECEMBER 6: The plush 10-storey tower gleams in the winter sun of downtown Ahmedabad. A hour away in Sachana, the 600-acre factory is abuzz with the activity of 2,000 workers. And back home in Ahmedabad, the spacious bungalow with its swimming pool and airconditioning screams of achievement.

It’s hard then to believe that Sushil Handa — always immaculately attired and soft spoken — owns the company that is one of India’s largest defaulters. The drive and ambition of this Punjabi MBA made Core Healthcare Asia’s largest producer of intravenous fluid (IV) just seven years ago. It also had a reputation for pre-paying loans.

Today, some significant wrong turns and questionable dealings later Core is a sick unit that does not even pay interest on its huge debts to a consortium of Indian and foreign banks. Its restructuring package is pending with its bankers.

As the new law allowing banks to seize assets of defaulters sets off a frenzy of activity, Handa is seemingly unperturbed.

UNPAID: RS 751 CR
‘I am not a stumbling block in the restructuring of my company. I am working with all lenders on possible alternatives.’’
Sushil Handa, Chairman
‘‘Unlike many other defaulters, we’re in a growth industry,’’ says the man once in great demand as a speaker at management schools. ‘‘All through the past five years when we were neck deep in debt, we maintained our leadership in the IV fluids industry with a 45 per cent market share.’’

Unlike most of India’s top defaulters, he insists, Core’s reneging on loans hasn’t ever been a business issue. That’s where his bankers vehemently disagree.

Bankers say Handa, using his considerable presence, got more money than he needed, diversified into unrelated businesses like manufacturing syringes, got into a hole trying to sell products in countries without financial systems, like Sudan, and finally misused funds.

Handa actually had a lot going right for him. The comatose markets didn’t affect him. ‘‘The IV fluids market is huge, his technology was right and he has lots of ideas,’’ says one Mumbai banker.

Another banker alleges that in 1995, when the company was struggling for working capital and growing, Rs 85 crore went out, among other things to buy out a company called Core International. Bankers allege this was the money that found its way to his brother Sunil Handa — an IIM graduate and son-in-law of former vice president Krishan Kant — when the two went their own way. Finance Director Jatin Jhunjhunwala doesn’t deny this outflow, but his explanation is evasive.

When Core Healthcare was neck deep in financial problems, a banker recalls how after visiting the plant, lender representatives got onto the same flight as Handa and his financial head for a lenders’ meeting in Mumbai. ‘‘Both of them flew business class, while all the lenders were in economy,’’ he says.

Handa may want the best for himself and his business—characterised not by rusting plants and layoffs, but by a world-class factory and happy work- ers—but it might all be a bit too much in these troubled times.

HOW THEY TOOK THE MONEY

As a company that started with a seed capital for Rs 4.5 crore in 1988 and grew 25 per cent the first three years, Core was a high flyer. A first-generation entrepreneur, Handa began taking loans for expansion with the 1991 liberalisation.

Core had an impeccable reputation of pre-paying loan instalments. Not surprisingly, when it borrowed Rs 750 crore in 1995 to set up the plant at Sachana, lenders like IDBI, IFCI and ICICI were only too happy to oblige.

CORE ISSUES
“Our debts are partly because of the lack of accountability of the same system that’s taking us to task for defaulting.”
Sushil Handa,
Chairman, Core Healthcare


‘‘ The time and cost overruns incurred in the Rs 891-crore expansion-cum-diversification programme adversely affected Core’s profitability.’’
An ICRA report


“We did try to help Core by restructuring debts. But now we have categorised all of them as NPAs.”
A bank representative

EXPERT TAKE
“These companies have been holding the country to ransom. I am glad that a breakthrough has been made in the form of the Bill since even the SC refused to go into the issue.’’
H.D. Shourie
Common Cause


‘‘While the intention behind the ordinance is good, the mechanisms worked out are wrong. I fear small companies with debt liabilities will be forced to make distress sales.’’
Gopal Krishna
Company Secretary,
JCT Electronics


The objective was to create huge capacities. Handa dazzled foreign banks with his plans and grasp of his business. A global depository receipt issue followed. ‘‘He got more money than he needed,’’ says a banker.

Working without letters of credit in attempting exports to countries without functional financial systems and setting up expensive sales forces, Handa’s margins remained on paper. Many payments simply didn’t come through. The write-offs showed up even in the healthy Rs 166-crore profit posted that year: the amount was reduced by Rs 72 crore in ‘‘discounts and sales promotion expenses’’
.

Jhunjhunwala’s explanation: ‘‘This is an accounting policy we have adopted whereby gross realisation value is greater than net realisation.’’ The discounts, he adds on his own, are given to independent distributors not connected to the company. At the end of the day, Core’s working capital got inextricably stuck. ‘‘As a first generation entrepreneur, Handa aspired for too much too soon and bit off much more than he could chew,’’ admits a top company executive on condition of anonymity.

Bankers say Handa’s estimates of his business and how he wanted to go about it went awry. Add to that the diversion of money and Core was headed for the default doghouse.

AND HOW THEY GOT AWAY

Consider the Rs 85 crore outflow that bankers say crippled the company. It shows up in the 1999-2000 balance sheet: Rs 45 crore as ‘‘loan to subsidiary company’’ and Rs 40 crore to advance for ‘‘acquisition of business’’. Jhunjhunwala says the Rs 45 crore went to Technology Finance Ltd, a subsidiary that ‘‘controls Core’s purchases’’
.

The Rs 40 crore went into ‘‘restraining Core International from export business’’. Core International, he adds, is now defunct, and ‘‘the benefits of this transaction have been already received’’. According to the company, the problems started when Core tied up with suppliers for supply of expensive equipment at the same time that banks faced a cash crunch and delayed payments.

Core took high-interest loans (between 20-25 per cent) to keep going. ‘‘And once we got into this trap, we could never surface,’’ a company official says.

The banks see it very differently. Core started exports without letters of credit to countries where exports were not backed by RBI guarantees (Export Credit Guarantee Scheme). The 1999-2000 balance sheet, for instance, shows Rs 60.42 crore as ‘‘export receivables’’ written off. Jhunjhunwala says the RBI approved a Rs 52 crore write-off. And the balance? That was advance provision for write-offs.

The company will not accept blame. Indeed they blame the creditors, saying they requested debt restructuring as far back as 1997, but ‘‘delay in timely action’’, as one official puts it, worsened the situation. They also blame a wrong analysis that led to the setting up of a captive-power plant, believing the Gujarat Electricity Board could not meet their 22 MW power requirements.

But the Board gave the company all the power they wanted. ‘‘That’s when our Rs 100 crore investment on the power project became a dead investment,’’ says Nayan Rao, director and member of the Core Board. Rao admits there has been cannibalisation and some employees were sacked but ‘‘these are insignificant and have nothing to do with financial hardships of the company.’’

Indeed, on a visit to the factory, workers seem happy, with most getting salaries above market rates. Loyalty is strong as well. Even though 1,000 of the workforce is on contract, 600 have been here for the last decade.

Despite the rosiness, in March 2001, Core reported a 50 per cent erosion in its network and unsurprisingly, approached the BIFR. The case for its restructuring is presently with the BIFR. Handa alleges that though more than a year has elapsed since the last BIFR hearing in November 2001, the banks have not yet submitted their statutory audit report, which he says should take a month’s time.

‘‘At the rate of 19 per cent interest, that would account for an almost Rs 16 crore interest loss on the Rs 750 crore NPAs piled up by us,’’ says Handa. ‘‘And this is an invisible loss because of lack of accountability of the same system that is taking us to task for defaulting.’’

Today, Handa hopes to close the year with an operating profit of about Rs 15 crore after posting a Rs 12 crore operating profit for 2001-02 and Rs 14 crore before that. ‘‘I am a professional manager and will do everything possible to build the value of the company.’’ Now, if only his lenders agreed.

(With George Mathew in Mumbai)




 
mr sushil handa has been the Chairman and Managing director of Core Health Care. While the public financial institutions has lost more than Rs 750 crores and has been referred as great bank robber , MR. Sushil handa continues to live lavishly. Thanks to blind and corrupt bureaucracy,income tax department , judiciary and top officers of financial institutions colluding with Handas

ARCHIVES
June 2004 / August 2004 / October 2005 / January 2006 / February 2006 /


Powered by Blogger