KOCHI: The heavily leveraged Uralungal Labour Contract Cooperative Society (ULCCS) seems to be grappling with a severe cash flow crunch, highlighting the strain of its mounting financial obligations.
Uralungal was forced to dip into public deposits to meet its debt servicing in the financial year 2023-24 (FY24), highlighting its deepening reliance on external funds for survival, according to a leading rating agency.
ULCCS could earn net cash accruals (NCA’s) of only Rs44.75 crore in FY2024, which was insufficient and much lower than half the amount required for the debt repayment of Rs102.43 crore durng FY24.
However, the debt obligations were timely met from the deposits the public have parked with the society, according to a source close to the society.
Total debt at Rs4070cr
While the total debt of ULCCs was estimated at about Rs4070 crore as of March 31, 2024, the society has a net worth of only Rs642.40 crore, working out a gearing of about 6.5 times, which is considered high.
Uralungal society currently has fixed deposits (FDs) of Rs1,786.23 crore from Primary Agriculture Credit Cooperative Societies (PACS) as on March 31, 2024. Uralungal society also had received short term deposits worth Rs622.89 crore from general public as on March 31, 2024
Kerala Bank is the largest lender to Uralungal Labour Contract Cooperative Society (ULCCS), with an exposure of Rs800 crore.
“Uralungal is 84.7 per cent owned by the Kerala state government, prompting calls from sections of the public for an audit of ULCCS by the Comptroller and Auditor General (CAG) of India, as mandated for entities with majority government ownership,” said an audit expert while talking to businessbenchmark.news.
ULCCS’s revenue in FY2024 declined by 16 per cent due to lower segmental revenue, particularly in roads and building segments, as per the society statistics provided to the rating agency. The society has reported a net profit of Rs4.6 crore for FY24 against Rs4.68 crore in the previous year.
Major clients
Major clients of the society include National Highways (NH) Department for highway projects, Public Works Department (PWD)of Government of Kerala (GoK) for state road development, central ministries such as Ministry of Panchayat Raj for rural roads under Pradhan Mantri Gram Sadak Yojana (PMGSY), several state government ministries such as Local Self Government (LSGs), Co-operation, Tourism etc, and a host of reputed private enterprises. ULCCS claims to have grown to be the largest labour contract society in the state, providing direct employment to more than 18,000 workers.
By virtue of being majority owned by the state government, ULCC enjoys a host of privileges too. In cases when the lowest tender is from a private contractor, the labour contract cooperative society will be awarded the work even if the society’s tender is higher by up to 10 per cent compared with the lowest tender.
Strong order book
Again, cooperative societies are exempted from the payment of security deposit and earnest money deposit. They also benefit from receiving advance payments of up to 20 per cent of the cost of work depending on the projects.
ULCCS has an order book worth Rs5,028.90 crore as on September 30, 2024, with Rs4,052 crore worth projects to be completed within 24-30 months, providing healthy revenue visibility over the medium term.
