Modern Foods - Disinvestment and After

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Turning Around MFIL Contd...

In August 2001, Peter Selvarajan, Managing Director of MFIL, said that MFIL would break-even in another two to three years. When the three-year lock-in period would come to an end in 2003, HLL would be able to call for the balance 26 per cent stake of GoI in MFIL, at a price that would not be less than the first acquisition.

This price would be determined by an independent accounting agency. Meanwhile, MFIL's management was planning to initiate talks with the employee federations to put in place a streamlined and productivity-linked incentive scheme for its workforce. Selvarajan said that MFIL management would initiate the second round of talks with the two employee federations, Hind Mazdoor Sabha (HMS) and Indian National Trade Union Congress (INTUC), to chalk-out a streamlined productivity-linked package of a permanent nature. Industrial relations had assumed great significance at MFIL after the disinvestment process was initiated, as a result of apprehensions regarding closure of units and subsequent lay-offs, he said. MFIL's management had initially worked out a one-year agenda with employee federations in September 2000. MFIL had a workforce of about 2000 of which 490 had applied for the VRS scheme introduced by the company in June 2001.

Of the 520 applications for VRS, about 490 were cleared at a cost of an estimated Rs 150 million to the company. In late 2001, MFIL was also looking for ways to spread its manufacturing base and was aggressively setting up ancillaries through arrangements with existing bakeries.

The company was exploring the possibility of expanding in big towns, where MFIL did not have a presence, besides spreading to other smaller towns. The next few years would tell whether MFIL could be transformed from an ailing PSU into a breadwinner by HLL.

Exhibits

Exhibit I: PSUs Approved for Disinvestment
Exhibit II: Important Issues Involved in Disinvestment
Exhibit III: MFIL - Unitwise Capacity, Production and Profit
Exhibit IV: Defective Production (%)
Exhibit V: Market Return of Unsold Loaves (%)
Exhibit VI: Highlights of MFIL Disinvestment