VARIOUS ISSUES FACED BY RK GROUP
Obsolescence of technology leading to fall in profitability. b.
Manufacturing facility’s positioning.
Its profitability is interlinked with RK Ammonia.
Working capital issue.
Debts with banks.
Requirement to modernize its plant to meet competition.
RK Agrifinance Company:
RBI norms tightened for NBFCs and leasing.
Still enjoys goodwill of farmers and hence should capitalize on it. 4.
Govt. lifted restriction on tractor manufacture. More competition. b.
Paucity of loans whereas other brands don’t face this.
Service operations of even other brands are going well. Main contributor to the profit.
IN ORDER OF PRIORITY
An outstanding legal issue and that too at the Supreme Court level is the most important one as it not only affects the operations of a company, but also affects its credibility and public image. The present status is that the Supreme Court has not provided an interim stay to the company and the Madras High Court also has refused to stay the PCB’s closure order. But, the good news here is that there is 10 months time left for the company to comply by PCB norms before the axe falls on it. Already Rs 6 crore has been spent to improve pollution control measures in the facility. Proposal for another 8 crores to improve the pollution control measures is also on the cards. The point of discussion should revolve around whether it would still be profitable to spend more money on this facility or to look for an alternate solution, possibly like shifting the site for facility. But when such an alternative is discussed, it should be taken into account that the profitability of RK Fertilizers is interlinked with that of RK Ammonia. Appealing against the closure order once more is an option, but with very low success possibility.
The next important issue is that of RK Fertilizers running into loss for the first time....
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