The Mumbai-based Lyka Labs currently looking for various options to stabilize its troubled financial position including disposal of the company's property at Vile Parle in Mumbai. Confirming the severe financial crunch in the company, N.I. Gandhi, chairman and managing director of the company told Chronicle Pharmabiz, “The financial position of the company is not stable right now and we are looking at possible options to solve the problem.” The company would require about Rs 8-10 crore to compensate its employees and it is still undecided on the possible solution to the problem, Gandhi said.
However according to informed sources in the company, the sale of the company's property could be one of the possible options to its problems. The other options, which the company presently exploring is either selling off some of the leading brands or to raise a corporate loan.
Confirming the crucial financial crunch in the company, the sources said that said that it is not yet been able to pay the Voluntary Retirement Scheme (VRS) compensation to about 150 medical representatives of the company and 30 distribution employees of the company. The VRS, which was announced in June 2002 was to be paid by December last year. Apart from the VRS, Lyka has also not been able to pay salaries to them since June 2002, when it was finalized that the VRS compensation will be executed in December 2002.
“As per the law, it is obligatory for the company to pay the salaries to the employees till the VRS is executed. However, none of the employees have yet received their monthly salary since June 2002,” said one of the sources.
Nevertheless, Gandhi denied the allegations of the employees. “Although there has been delay in the payment of the salary, it has been always paid. The delay in the payment will be sorted out once our cash crunch problem is solved,” he said.
Gandhi said that the company has a long history of labor-management problems. According to him, multi unionism prevailed in the company, which has been a key factor for the company's financial woes and ultimately to the hiving of the company into a joint venture with the Hyderabad-based Hetero Drugs, called Lyka-Hetero Healthcare Ltd. “There used to be three unions in the company and all the three used to fight against each other creating problems for the management,” said Gandhi.
In February 2002, Lyka Hetero Healthcare Ltd was formed, in which Lyka Labs held 49 per cent, the remaining being held by Hetero Drugs. A whole basket of Lyka's drugs and technologies involved were transferred to the new company. In turn, Lyka Labs was paid Rs 49.8 crore. Also, it was agreed that Lyka will get an annual 4 per cent royalty from the net sales of the new company. According to Gandhi, maximum out of the received amount have been already spent on taxes, debts, liabilities, gratuity expenses, and others, making the coffers empty.