Investors bail out polysac factory
-US$3M to be injected initially
Stabroek News
February 5, 2004
Malaika Holdings of Canada and Neal & Massy (Guyana) Ltd have taken over the insolvent IDS Holdings, manufacturer of poly sacs, and will be injecting US$3M into the operations.
Planned start-up, under the label, Polytech Industries Inc, is scheduled for March 1 and already 20 old employees have been rehired, says director and top Neal & Massy official in Guyana, Deo Persaud. Malaika Holdings holds 80% of the stock of the new operations and Neal & Massy (Guyana), 20%. The two firms worked together successfully in the joint venture operation of T Geddes Grant Limited.
Eight months ago, IDS Holdings sent home the last of its workers after it succumbed to competitive pressures and a debt of US$2.2M with the Royal Bank of Trinidad and Tobago (RBTT) and the International Finance Corporation (IFC). Arrears ran into two years and by June 2003, the firm had no money to purchase raw material. In nine years of operations, all of which had been loss-making except for 1999 when the firm broke even, the company had eroded its capital base.
RBTT, the lead creditor, in its search for a buyer to recover its debt, contacted Malaika Holdings, one of its clients, with an offer to acquire the operation in Guyana at a discounted value of the debt which remains on the books of the operation but is restructured.
"Malaika runs a tight ship and specialises around the world in poly bags. We have a similar arrangement with them in Trinidad with Geddes Grant Industries (for light manufacturing)," Persaud told Stabroek Business on Friday. The company is also in St Lucia in light manufacturing operations and has three polysac plants in Africa, one in India and one in Jamaica.
Suedatt Singh
The operation in Guyana will initially focus on polysac production and once it has recaptured its market and can operate on a one shift system per day, will look to go into light manufacturing on the same site.
"We have to work to get back some of the market. We approached some of the major players and they said that they would be willing to buy, but this is subject to the price and quality of the product," Persaud said.
The new investors' US$3M will go towards upgrading the polysac plant and will also be used as working capital. Quality will be the watchword as well as efforts to keep prices competitive, Persaud indicated. Orders have already been placed for raw material and these are expected to be here by the third week in February. An Indian national, Srinivasan Nagaraj, will assume the top management position and the rehired staff were tested to ensure that they were properly trained for the operation.
The company intends to export some of its product and will capitalise on its network of suppliers to reap the benefits of bulk purchases.
Persaud said the plant is small and would not allow for exports beyond the Caribbean but it could be modified and expanded. He recognised that Malaika Holdings had the experience and knowledge of the polysac industry to make the investment successful.
Persaud indicates that the firm is in the process of applying for a tax holiday given that it is re-starting the operations. He said the company was assured that it would get these concessions.
Asked about the rationale for Neal & Massy's investment in this venture, Persaud said the firm, in Guyana since 1968, is here for the long-term.
"We recognise that we have to diversify in other areas as there is a limit to what we can do in existing areas. We have to get into areas to tap into exports if there is to be more employment and spending in the economy," he said.
The directors of the Polytech Industries are Persaud, Pancha Sankaran, Shireesh Chipluncar and Roy Prashad (Secretary).
IDS Holdings was incorporated in 1993 and took over the polysac project designed for Wray's Enterprises under a Line of Credit extended by the Indian Government. At the time of the take over, the project was seen as providing a substitute for costly, imported jute bags being used by the rice, flour, sugar and stock feed industries.
IDS owed the government US$1.4M for the plant under that line of credit. It subsequently took a US$2.2M loan from the Royal Bank and the IFC to have the plant fully operational by securing additional machinery including sewing, cutting and extruding machines and for new buildings.
However, after it ran into difficulties, the firm was unable to secure an investor even though it had advertised itself on Go Invest's website since 2002. The brothers felt if the sales of 1999 could have been sustained, the company would have still been in business.
Among the businesses lost to the firm were Guyana Stockfeeds Ltd since its privatisation and a chunk of its