Rabin Ghosh
 
Mumbai: The Rs 2,300-crore Yash Birla group is considering rationalising the number of manufacturing units of its auto and engineering business to 3-4 from the current 7, in order to gain from the economies of scale, Praveen Gupta, chief executive of the sector, said.

The auto and engineering business comprises Birla Perucchini, Birla Precision, Dagger Forst Tools and Indian Tool Manufacturers (ITM).

The move could logically free up real estate for commercial exploitation, though Gupta refused to confirm this.

The manufacturing line of Dagger Forst has been shifted to Ambarnath from Thane. Gupta didn’t comment on the commercial exploitation plans of the Dagger Forst plot.

Birla Precision (earlier known as Birla Kennametal) and Dagger Forst are listed. ITM was originally a division of listed Zenith Birla, now spun into a subsidiary. In Birla Perucchini, the group has bought out its foreign partner Perucchini for an undisclosed sum, making it its wholly owned subsidiary.

The group runs four sites in Aurangabad, and one each in Nasik, Gandhidham and Ambarnath. “For a group of our size, it doesn’t make sense in having so many production sites. Logically it makes sense to move everything to Aurangabad since we have four contiguous plants there. So, one of our first moves after the restructuring process would be to rationalise the number of sites,” Gupta said.

As part of its restructuring exercise, the Yash Birla group has appointed Ernst & Young to advise it on having an auto and engineering business entity. “As far as business is concerned, we are already operating as a single unit. Legally, we hope to finish all processes like deciding swap ratios and merging entities by March 31, 2009. There could be one or maximum two listed entities post that,” Gupta said.

The auto and engineering business of the group is worth about Rs 250 crore, with ITM, being the flagship, contributing Rs 80 crore. Rest are smaller entities with revenues in the range of Rs 40-50 crore. Operating margins range from 15% to 45%.

Gupta said the group plans to invest Rs 100 crore this year in upping capacity, which could see company tapping external source of funds leading to equity dilution. In the recent past, Dagger Forst had raised Rs 18 crore in a follow-on public issue.

Gupta said the group would look at having its first overseas plant in China, which could entail an investment of Rs 25-30 crore.

Source : DNAIndia