The company was declared sick and referred to the Board for Industrial & Financial Reconstruction (BIFR) in March 1997. However, if revival measures are implemented properly the company can break even in a year from now and without the need of central government fund. Observers say that this will only happen when production touches Rs 9 crore a month.

Signs of gradual recovery comes as a surprise since the public sector unit had been given up as a terminal case as recently as August 1997, when production was down to about Rs 3 crore a month. However, with the implementation of tight financial control, production in August 1998 stood at Rs 7.3 crore, of which Rs 4 crore has been contributed by tablets and capsules.

But even the most optimistic observer isconvinced that the unit will need a massive injection of funds from the promoter parent, the central government. The company's total accumulated losses of about Rs 140 crore include bank dues of Rs 65 crore and about Rs 83 crore to the government on interest alone.

The IDBI, appointed as the operating agency by the BIFR, has submitted its techno-economic feasibility report. Well placed sources believe that the report has suggested the government pump in Rs 60 crore and banks lend at their prime lending rate (PLR) instead of the 18 per cent to 19 per cent commercial rate charged so far. The report is believed to have suggested that the earlier rate of interest should also be at PLR so that the credit would be passed on to Hindustan Antibiotics.

Since the entire BIFR process is expected to take another six to eight months, the new management is believed to have initiated its own internal cost cutting measures, which form part of the eventual BIFR revival scheme.

From September 1997, Hindustan Antibioticshas been producing only what it can sell. This has meant there is no inventory pile up, while it allows the phasing out of some of the products manufactured. The company manufactured 128 products till the recast began in September 1997. This has been brought down to 68, with the intention of further reducing this by another 25.

Hindustan Antibiotics owed about Rs 15 crore to its suppliers, which have been rolled over at competitive rates and now has lines of credit worth Rs 3.76 crore. The company is looking for greater limits. By eliminating middlemen in the purchase of raw materials, the PSU has managed to reduce expenditure by 20 per cent, while administrative expenditure has been reduced to about Rs 1.5 lakh per month, against the previous Rs 4 lakh per month. A voluntary retirement scheme (VRS) attracted 366 employees up to August 31, 1998. While the scheme is still open, officials do not believe there will be many takers as the unit appears to be looking up.

Tight financial control is one part ofthe two-pronged strategy to turn the unit around. The other part is to manufacture products which have a market. While its bulk drug production facilities for pen-G have been hived off to the joint venture, Max-GB, it continues to manufacture streptomycin and penicillin salts. The streptomycin plant has been restarted from June 1998, while the new formulation III plant, which began production in May 1998, has started manufacturing penicillin and non-penicillin related tablets and capsules. This line contributed Rs 4.5 crore per month.

The company is also exploring the posssibility of setting up a joint venture for the manufacture of Vitamin B 2 and B 12 in collaboration with another domestic manufacturer. It could take another six months before anything is finalised, and sources did not rule out leasing these facilities to Max-GB, which is believed to be interested for its penicillin production.

Hindustan Antibiotics has lined up the launch of two new products, cefurozine axetel tablets and cefaparoxineinjections. However, a shortage of funds has meant that the money required for the launch of these products, including marketing and branding them, will be hard to come by.

However, it is not all smooth sailing. The company had proposed the sale of 65 acres of `surplus' land for generating funds for which it has obtained the central government's permission. However, the original land owners have obtained a stay from the Mumbai high court on the proposed sale. The company had got the land vacated via an appeal to the Supreme Court. Since the case is still pending in the high court, the likelihood of the company getting anything like a fair market value for the land is ruled out. The company is also believed to be seeking the law ministry's view on whether it needs state government permission to sell the land.

Although Hindustan Antibiotics finds no place in the government's list of PSUs headed for disinvestment, it is clear that it will have to be brought to a semblance of health before there is anymention of divestment. A recent revaluation of assets has shown that although the balance sheet shows its assets as being approximately worth Rs 95 crore, these are now worth Rs 700 crore.

The 36-year-old company made its first loss in 1993-94, of Rs 12 crore. These have subsequently mounted every year and it is unlikely that it will post an operating profit this year, inspite of the company attempting to implement strict measures.