Bad times as HMT Watches may soon shut shop: report

The government has decided to wind up the state-run watch company, HMT Watches, which is reeling under losses since 2000 and is finding it difficult to generate adequate resources to pay even salaries to its 1,100-odd employees.

The company is among 11 central public sector companies that are leaning on government's non-plan funds for payment of statutory dues (provident fund, gratuity, pension, Employees State Insurance and bonus) and salary and wages for seven months from 1 September 2013 to 31 March 2014.

The Cabinet Committee on Economic Affairs on Wednesday approved a proposal for providing non-plan budgetary support of Rs287.67 crore for liquidation of statutory dues of eleven CPSEs under the department of heavy industry. 

HMT Watches , a pioneer in horological industry in India, was set up in 1961 in collaboration with Japan's citizen watch. The company has posted a loss of Rs242 crore in 2012-13 compared to a loss of Rs224 crore in 2011-12.

In 2000, HMT Watch Business group was restructured as HMT Watches Ltd. However, the company started making losses soon after, following which a revival plan was mooted and approved by the BRPSE in 2006.

HMT Watches manufactures a range of models of attractive designs and affordable prices, including Elegance, Utsav, Sangam, Sona, HQ, Inox Gold, Inox, Economy  - from quratz collections and mechanical-handwound and automatic series, the Braille and the pocket watch.

The company's net loss rose to Rs242.47 crore in 2012-13 from Rs224.04 crore in 2011-12. At the end of March 2012, it also had government loan, including budgetary support for salary and statutory dues, amounting to Rs 694.52 crore.

''The government has decided to shut down HMT Watches and HMT Chinar Watches Ltd. The Board for Reconstruction of Public Sector Enterprises (BRPSE) has already recommended it and the board of directors has also given the go-ahead,'' The Indian Express quoted a senior government official as saying.

With the finance ministry and Planning Commission not supporting the BRPSE proposal, the government had asked the company to get the plan vetted by a consultant.

The company appointed ICRA Management Consultancy Services Ltd and prepared a revised proposal based on its report. Later, another consultant was roped in to study the HMT group of companies, including HMT Watches Ltd, following which another plan was mooted envisaging cash infusion of Rs252.70 crore and non-cash assistance of Rs1,247 crore.

According to the directors' report of HMT Ltd, as of 31 March 2013, the watch company could not show significant improvement in performance in 2012-13 due to factors like paucity of working capital, erosion of trade channel and high cost of borrowings. It had sales worth Rs11.06 crore and production of Rs14.03 crore during the year.

As regards HMT Chinar Watches, the report said it could not be sustained at optimum levels due to working capital constraints and the situation prevailing in Jammu and Kashmir.

Most of the employees have been given VRS, leaving about 54 employees at the Srinagar and Jammu units. It had negligible sale of Rs0.36 crore in 2012-13 with zero production, taking net losses to Rs51.16 crore compared to Rs44.04 crore in 2011-12.

HMT Watches has four units, including those in Bangalore and Tumkur in Karnataka, and Ranibagh in Uttarakhand, while HMT Chinar Watches has two units at Jammu and Srinagar.