A Case Analysis of the Turnaround of a Mangalore Fertilisers Pvt Ltd

Topics: Asset, Karnataka, Balance sheet Pages: 14 (4530 words) Published: March 28, 2013
Public Sector Reforms in Karnataka – A Case Study of the Turnaround of Mangalore Chemicals and Fertilizers through Strategic Partnership Uma H. S.1, Dr. Venkatesh B. S. 2
1- Assistant Professor, 2-Associate Professor, 1-Vidhya Vardhaka Sangha First Grade College, Bangalore, 2- Maharani’s college for Arts, Commerce and Management, Bangalore

The article deals with the performance appraisal of Mangalore Chemicals and Fertilizers which was the very first state public sector unit in Karnataka to be privatized and its renewal through Strategic Alliance partnership by inducting the UB Group on its Board. The GOK should learn from its previous experiences that it is pertinent to take timely decisions and develop suitable modalities for disinvestment rather than let the SPSUs to be shut down. This study based on Altmans’ Z score analysis shows clearly that privatization has not only helped in the turnaround of the company but also has improved the operational efficiency. Keywords: Public Sector Reforms, Privatization, Strategic Partnership, Z Score Analysis, Performance appraisal.

Karnataka state has been a pioneer in the establishment of SPSEs. The erstwhile Mysore state launched various industrial ventures as Government undertakings to primarily exploit the available resources of raw materials and power in certain regions as well as to generate gainful employment opportunities. However in the recent years these SPSEs have become sick with the passage of time. The purpose for which some of the PSEs were started have lost its significance. The introduction of Economic Reforms in 1991 and the policies of privatization, globalization and liberalization sweeping the economy thereof necessitated the state Govt. to reconsider the justification of investments in the public sector. Added to this the increasing compulsions to spend on social sector induced a process of appraisal of PSEs on a case to case basis. After that, specific solutions like restructuring / merger and amalgamation / identification of strategic partner / strategic sale / privatization / closure has been recommended. In this study an attempt has been made to analyze public sector reforms in Karnataka with special reference to disinvestment policy in case of select SPSUs. Although there are 6 different categories of enterprises the study confines to Manufacturing Sector only. This is because manufacturing enterprises being commercially oriented should be able to meet the market forces of competition to survive. While profitability should be a goal for all PSEs under the changed economic scenario it is more so for manufacturing concerns. The study could identify only two SPSEs which have been privatized in Karnataka viz: Vikranth Tyre and Mangalore Chemicals and Fertilizers Ltd (MCF). The objective of the study is to analyze the impact of Disinvestment on the performance of the chosen unit. The pre and post disinvestment performance appraisal of MCF is based on the statistical tool

of Multiple Discriminant Analysis (MDA) called as ‘ Z ‘ score analysis.


1.1 Brief profile of Mangalore Chemicals and Fertilizers
Initially called as Malabar chemicals and fertilizers private limited, it was incorporated in 1966 by Duggal enterprises to produce urea by using naphtha, a petrol based feedstock. In 1969 when Duggal enterprises withdrew from the project it was converted into a public limited company and renamed as Mangalore chemicals and fertilizers. The company produces a wide range of products in the present that include urea, diAmmoninm phosphate, muriate of potash, granulated fertilizers, micro nutrients, soil conditioners etc. at its plant in Panambur in Mangalore. Infact it is the only fertilizer manufacturing enterprise in Karnataka. The article covers only the case study of Mangalore chemicals and fertilizers which was the first state public sector unit( SPSU) to induct a strategic partner for the renewal of the company....
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