May 30, 2020
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Just The Aperitif?

The SC aids a Haryana brewery win round one against prohibition

Just The Aperitif?
outlookindia.com
-0001-11-30T00:00:00+0553
YOU would think that a Supreme Court judgement in favour of a beer manufacturer to resume production in prohibition-ruled Haryana would send the champagne corks popping. But at Inertia Industries Ltd, the company which suddenly lost its raison d'etre one year ago, chief executive officer Sunil Tandon is far from a partying mood.

After the High Court dismissed Inertia's writ in December 1996, the company had moved the Supreme Court in January 1997 which, on May 8, issued Inertia a temporary licence to manufacture beer. With a catch: it could only export the Nonetheless, the judgement is set to open a Pandora's box of opportunities for the rest of the breweries in the state.

The story of Inertia--strange name for a beer manufacturer--picks up momentum in July 1993, when it got a licence to set up a brewery at Dharuhera in Haryana. To set up the plant, the company came out with an initial public offering, which took the share capital to Rs 12.08 crore, 40 per cent of which is held by the public.

Growth came fast. In two years, the turnover jumped over eight-fold, from Rs 4.32 crore in 1993-94 to Rs 35.16 crore in 1995-96. Its premium product Sandpiper-positioned as the "Champagne among beers"--gained brand equity market share in Delhi and Mumbai. With high incentives, the sales figures climbed. And then the wheels turned.

On May 31, 1996, the Punjab Excise Act was amended, empowering the state of Haryana to ban the manufacture and sale of liquor. The next day, a notification was issued to the breweries to stop the manufacture of beer from July 1, 1996 or till the licence comes up for renewal. For Inertia, the black day was September 5, 1996.

While the case will come up for final hearing in the Supreme Court after the summer vacation, Tandon and his attorneys are gearing up to extend the order to "sell outside Haryana, but within India". In addition, since the defence canteens are outside the purview of prohibition, they want to be allowed to sell to the Canteen Stores Department (CSD), which has already approved the Sandpiper brand for sale.

Meanwhile, Inertia has already run up a loss of Rs 7 crore. In June, to make matters worse for the brewers, the government hiked the export pass fee--a sort of tax levied when manufacturers want to sell their ware outside the state--by as much as four times, from Rs 6 to Rs 24 per case. In all other states, this fee ranges between Rs 3 and Rs 6 per case. Problems were compounded further for Inertia as the retrenched staff went on a go-slow asking for a year's salary. On the last day of the order, therefore, the excise department confiscated goods worth Rs 1.5 crore in inventory and raw material.

The settlement for 500 retrenched staff came to Rs 1.5 crore. Rs 1 crore were expenses for 10 production-free months and in addition Rs 3 crore were for bad debts with the distributors. Now, even the salaries are not being paid on time. Says Tandon: "We have been forced to delay salaries by about a month or more. Also, Bansi Lal's diktat has affected my other companies. I have Rs 17 crore invested in a brewery in Aurangabad. For want of a Rs 5-crore loan, it cannot be started."

Inertia has not paid the companies from which it had leased machinery. It has moved some machinery to the Aurangabad plant, slashing the capacity of the brewery by a third. The questions that remain unanswered: where do the shareholders of Inertia stand now, with the capacity of the brewery slashed? After all, aren't the shareholders rightfully the final owners of the company?

Meanwhile, the company's dues with its bankers, Oriental Bank of Commerce, have touched Rs 9.81 crore. The bank had foreclosed the loan but is now reportedly rewriting the agreement on softer terms. There is also a notice pending from the Haryana State Industrial Development Corporation, asking Inertia to clear the total default of Rs 33.77 lakh by January 15, 1997, failing which the assets of the company would be taken over.

Three weeks after the SC order asked the state to give Inertia a temporary licence, there has been no response. "We are sending them reminders everyday," says Tandon. A possible fallout: contempt of court. In his newly-shifted office, watching the company stock prices moving up from the nadir of Rs 2.50 on the news of the court order Tandon is brewing plans for the next combat. "I have no options," he says

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