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Ucal Fuel Systems to close operations of Puducherry plant

The restriction on emission norms, technological change, and transition of Bharat Stage IV to Bharat Stage VI, and ultimately to Electric Vehicles has resulted in rendering our products completely outdated, the company said.

January 10, 2022 9:23 IST | India Infoline News Service
Ucal Fuel Systems Limited has decided to close completely the manufacturing activities at its Plant II situated at PIPDIC Industrial Estate, Mettupalayam, Puducherry effective from March 12, 2020. 

“The manufacturing activities of the Puducherry unit will be closed after completion of necessary formalities and machinery either relocated to the company's existing facilities or disposed off.

It is pertinent to mention here that the said unit comprises an insignificant portion of operations of the Company and the said closure does not have any material and adverse effect on operations of the Company,” it said in a filing on Monday.

The restriction on emission norms imposed by the Government, technological change, and transition of Bharat Stage IV to Bharat Stage VI, and ultimately to Electric Vehicles has resulted in rendering our products completely outdated and falling into disuse. Alternative products in the fuel systems and diversification of business were considered to be far-fetched besides Company facing intense competition. As such there is no alternative business or business prospects to continue our operation at Puducherry Plant II.

The sales turnover from Plant II which was Rs140cr during the financial year 2018-19 has been gradually reduced from Rs117cr in 2019-20 to Rs23cr in 2020-21 and from April 1, 2021 to September 30, 2021, the sales turnover was only Rs10cr.

During early trade on Monday, Ucal Fuel Systems Ltd was trading at Rs158.25 per piece down Rs1.25 or 0.78% from its previous closing of Rs159.50 per piece on the BSE.

“As our customers are already in transition from Bharat Stage VI to Electric Vehicle leaving no market for the products manufactured by the Company, the lack of orders from our customers has created serious challenges to the planning and feasibility of running the Plant II at Puducherry efficiently and economically,” company said.

It further said, when the company to contain losses in Plant II issued transfer orders to few operators to relocate themselves to other plants of the company, some of the operators indulged on sudden illegal strike which had resulted in Plant II declaring a lock out on January 3, 2021 and was eventually lifted on March 26, 2021. The lockout as well as the lockdown declared by the Government due to Covid-19 pandemic further deteriorated the sales prospects and the Management has found it extremely difficult to run the Plant II at Puducherry after the sales turnover started plummeting.

The future business prospects are very bleak to run the Plant II at Puducherry with the existing manpower for a meagre sale.

“The Management, after carefully considering the entire situation, is left with no other option but to take the decision to close down the Plant II situated at A-98-A100- A107, PIPDIC Industrial Estate, Mettupalayam, Puducherry – 605 009,” company said.

Further the Company is constrained to close down the Puducherry Plant as it would only lead to the burden of excessive cost of production resulting in financial loss and thus becoming a drain on the resources of the Company.

Under the above circumstances, the Company is compelled to close down the Puducherry plant on the expiry of 60 days from the date of this notice given to the concerned Authorities.

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