The well-known tractor brand ‘HMT’ may get back its glory, as the Cabinet Committee on Economic Affairs (CCEA) is likely to consider an over Rs 1,000-crore revival package for the Bangalore-based HMT Ltd on Thursday. The company has been in the red of the last five years.
“The proposal involves cash infusion of around Rs 450 crore and non-cash assistance of around Rs 630 crore,” a senior Government official told Business Line .
A major part of the cash infusion will be used for modernisation, technology upgradation and working capital, while part of that will be utilised for meeting expenditure on the 1997 wage revision, he said, adding that the revival plan was for HMT’s tractor business.
PwC recommendations
The revival plan has been prepared on the basis of recommendations of PricewaterhouseCoopers (PwC).
It involves selling surplus land to fund the revival package. The company has an authorised share capital of Rs 1,450 crore.
The shares of the company rose over 1.4 per cent to close at Rs 28.45 on Tuesday.
The company was established as Hindustan Machine Tools for production of machine tools in 1953.
It became HMT Ltd in 1978. In 2000, it was converted into a holding company with five subsidiaries and product diversification.
The holding company directly operates the tractor business with two plants (Pinjore in Haryana and Hyderabad in Andhra Pradesh).
The revival scheme may not only provide wage revision but also raise the retirement age to 60 years from 58.
These two provisions will benefit around 1,500 employees.
With the help of this revival package, the company aims to increase production from around 4,500 currently to 10,000 in the first year, and to 30,000 at the end of the fifth year.
The revival plan is likely to bring the company back on the path of profitability.
The company is likely to earn over Rs 475 crore in the first year of implementation of package and around Rs 1,700 crore in the fifth year.
HMT Ltd is one of 14 players in the Indian tractor market.
According to various research agencies, this market has a potential of selling over 7.25-7.4 lakh tractors annually, with a compounded annual growth rate of over seven per cent. HMT aims to increase its market share to four per cent.