The government has decided to shut down HMT Watches and HMT Chinar Watches following its continued losses since 2000. The company posted a loss of ₹242 crore in 2012-13.
HMT has been unable to generate sufficient revenue to pay remuneration to its employees regularly. Incorporated in 1953 in collaboration with Japan's Citizen Watch, the watchmaker's net loss rose to ₹242.47 crore in 2012-13 from ₹224.04 crore in 2011-12.
At the end of March 2012, the company had government debt amounting to 694.52 crore.
"The government has decided to shut down HMT Watches and HMT Chinar Watches Ltd. The Board for Reconstruction of Public Sector Enterprises (BRPSE) has already recommended it and the board of directors has also given the go-ahead," The Indian Express quoted a senior official.
The losses began after 2000 when the company reconstructed from HMT Watch Business to HMT Watches Limited.
In 2006, BRPSE approved the revival plan, but the finance ministry and Planning Commission did not support the proposal and hence the government asked the watchmaker to get the plan examined by a consultant.
After the government order, HMT appointed Indian independent and professional investment Information and Credit Rating agency (ICRA) Management Consultancy Services Ltd and it came up with a revised proposal based on its report.
Later, one more consultant was appointed to study the HMT group of companies due to which another plan was suggested envisaging cash infusion of ₹252.70 crore and non-cash assistance of ₹1,247 crore.
According to the director's report as on March 2013, the watchmaker failed to prove its improvements in 2012-13 due to high cost borrowings. The company revenue was ₹11.06 crore, whereas its production cost was ₹14.03 crore during 2012-13. As on March 31, 2013, the watchmaker had 1,105 employees.
However, 2012's report added that the company failed to sustain at optimum levels following working capital constraints and violence in Jammu & Kashmir.
Currently, most of the employees have been given VRS; ultimately only 54 employees have been working at its Srinagar and Jammu units.
The company did not manufacture any watch in 2012-13 and its revenue was only ₹36 lakh, which stretched its net losses to ₹51.16 crore against its previous loss of ₹44.04 crore in 2011-12.