In January 2012, Regency Ceramics closed the factory after riots broke out at the Regency Ceramics factory and workers set fire to the factory and machinery. The President (Operations) died at home. The plant was “beyond repair” and the company announced it was closing. About 1,500 people are unemployed.
Now, after 11 long years, the company is ready to reopen. Buried in the gaps between these two eras is a story of how a thriving business was undermined by political rivalry and how a convoluted legal system prevented it from regaining its footing.
At the time, Regency Ceramics was a popular tile brand. The company was established in 1983 and started operations in 1985. It was built step by step by Dr. GN Naidu. Its only competitor in South India is Spartek. In 2011-12, the company, listed on the BSE and NSE, reported a turnover of Rs 178 crore and a pre-tax loss of Rs 27 crore due to disruption in gas supply from GAIL.
in the crossfire
A retired Andhra Pradesh government official who was serving at the time recalled that the core of the problem was a political grudge against the then Puducherry South MLA. The MLA’s opponents want to “bring Yanam to heel”. The solution is to shut down the largest industrial ceramics company in Yanam. The company was a victim of political crossfire.
But it turns out the lockdown was just the beginning of Regent Ceramics’ pain. The company has insured its plant and machinery worth Rs 33.612 million with the public sector state insurance company. After the incident, Regency filed a claim of Rs 157 crore. “Insurers are refusing to even admit liability,” said Narala Satyendra Prasad, the company’s whole-time director and chief financial officer.
The dispute between the company and the insurance company entered arbitration, and in March 2022, an arbitral tribunal composed of three retired Supreme Court judges (Justices Arijit Pasayat, Jasti Chelameswar and Kurien Joseph) unanimously ruled in favor of Regency Ceramics , and ordered National Insurance to pay Rs 1.57 billion plus interest.
signs of revival
National Insurance has since applied to the court to set aside the award under Section 34 of the Arbitration and Conciliation Act 1996. Regardless, the promoters, confident of a legal victory, began working for the company’s revival. A Rs 120-crore revival plan is in the works, the first part of which is to start the first of four production lines by the end of this year. First, the promoters invested Rs 15 crore from their own funds. The process of unblocking the factory has begun, but as it goes on, the company has restored its dealer network and is manufacturing some products on third-party contracts in Gujarat. “My plan is to start sales in Sankaranti (mid-January),” said Satyendra Prasad. All four production lines will be completed in summer 2024.
Couldn’t the promoters have used their own funds to restart the project sooner? Prasad said there were problems raising both equity and debt. The promoters were unsure how the legal dispute with National Insurance would play out and so did not want to risk their money. As for debt, when management realized that the lockdown was not going to end anytime soon, it negotiated a one-time settlement with banks to pay 60% of dues. A company with a “history of OTS (one-time settlement)” always finds it difficult to raise loans.
The success of the arbitration has changed the view of promoters – they now do not see the risk of bringing in their own capital. Once the factory is operational and revenue is generated from sales, raising debt is not a big problem.
Prasad, son-in-law of GN Naidu, Chairman and Managing Director, was a serial entrepreneur before joining Regency Ceramics. He ran a deep-sea fishing company for several years until the Indian government suddenly canceled all the company’s licenses amid protests from coastal fishermen. Two trawlers roam the Arabian Sea and “we make big money”. He then started a coconut processing company and found success using virgin coconut oil, but a cyclone destroyed the coconut groves in the company’s exclusive area in Andhra Pradesh. In the early 2000s, Prasad, a computer engineering graduate from Guindy College of Engineering in Chennai, started an IT company and exited it profitably after a few years. Only when Lijing Ceramics was in trouble did he devote all his time and energy to the company.
Now, Prasad believes the worst is over for the company. Regency’s first production line will produce 7,000 square meters per day; when all four production lines are put into use, the company’s daily output will reach 25,000 square meters. A dipstick survey of dealers revealed that Prasad Regency still has good brand memory.
“The dealers are happy that Regency is back open,” he said.