Informing educating and connecting Indians across the globe . . . by Virendar Chand
STARTING A MANUFACTURING UNIT (FACTORY) IN INDIA
There are three options for those wanting to start a manufacturing unit or as some say a factory in India. 1.Build a new factory. This would involve purchasing land, machinery, getting proper licensing etc. For a majority of returning Indians doing all this would be a nightmare especially when one considers the problems of Indian bureaucracy. 2.Purchase a running factory. This one is self explanatory. One could buy a running manufacturing unit or even a partnership.3.Purchase what is called a sick industrial unit in India While the first two options are self explanatory. Lets discuss why purchasing a sick industrial unit is a choice potential entrepreneurs should consider.
What exactly is a sick industrial unit?
An industrial unit or shall I say factory that goes into financial trouble and is unable to pay its debts can be called a sick unit. In most cases such a factory would have ceased production.Such Factories are taken over by the banks that are owed money. The owners who owe this money usually have walked away owning a lot more than what the factory is worth. One can compare the sale of a sick industrial unit to a power of sale scenario.
Why buy a sick industrial unit:
There are several advantages to this. let me list some of them:When you buy a sick industrial the entire infrastructure is already there. The factory building is present. The electric power license is setup and power just needs to be turned on.The manufacturing license etc have already been issued by the authorities to the previous owners. To start a new factory all this work will have to be done. Licenses obtained, power connections sanctioned. This would cost not only money but time, LOTS OF TIME!Banks are holding some sick units with outstanding loans of several million dollars. Many such sick industrial units can be purchased for about 10 cents on the dollar or even less if you know how to go about it.Banks are not in the business to run factories and want to clear their books. If you have the proper background banks may be more than willing to get the factories sitting ideal to offer many incentives for someone to restart the factories.Governments of the state where such units are sitting ideal are more than anxious to get their citizens back to work. Many state governments also offer loans for manufacturing units. More information about how to purchase sick manufacturing units, why a unit becomes a sick unit etc. are discussed in my book THE NRI GUIDE 2012/2013.