The Hindu Business Line : Indian cos turn global turnaround specialists

Domestic companies are making their mark as turnaround specialists across the globe, with a host of manufacturing sector firms successfully buying out loss-making companies abroad at throwaway prices with the aim of getting them back on track. The underlying strategy behind the move is to gain easier access to restricted markets like the US and the EU using the target company as a foothold and then leveraging its brand value and customer linkages.

For instance, Gurgaon-based Continental Engines, which acquired loss-making European re-manufactured engines firm Vege in July last year, claims to have turned around the company in just six months through mainly cost control initiatives. The company will, however, retain its two units in Holland and Tunisia.

Packaging major Essel Propack, which acquired units of UK's Arista Tubes and Telecon Packaging, is on turn around mode in the both loss-making firms.

GHCL Ltd acquired a controlling stake of 65 per cent in Romanian soda ash firm SC Bega Upsom at $19.50 million in December last year. A month into the acquisition, GHCL managed to ramp up production in the Romanian plant to 650 tonne per day, a 34 per cent increase from the previous year's per day average of 486 tonne (from January 2005 to November 2005). In addition, GHCL after implementing cost reducing measures is eyeing profits from the unit in the short-term.

Around the same time as the Romanian acquisition, GHCL also acquired a 90 per cent stake in US textiles firm Dan River Inc for $17.50 million. The US-textile major had already shut down various operations in several of its plants after having filed for Chapter 11 bankruptcy in March 2004. GHCL gained from the move to take over Dan River as it got access to the US firm's existing marketing arrangements valued at around $250 million.

Among the early movers, Wockhardt acquired Wallis Laboratories, UK in 1998 for $8 million and successfully turned around this company in a year's time. NatSteel's acquisition by Tata Steel gave the latter significant growth opportunity from a long-term perspective, more so considering the ample scope of improvement in the operational efficiencies of NatSteel.

Tata Motors's acquisition of the Commercial Vehicles Unit of the bankrupt Korean group Daewoo has not only provided the company with an enhanced product portfolio but also allowed it to make a mark in the international market. The company is now using Korea as a base for commercial vehicle exports to Asian markets other than Korea.

Delhi-based medical devices firm Poly Medicure Ltd in February 2006, bought out American firm, US Safety Syringes, for $1 million.

The acquired company, which holds eight patents and two FDA approvals for safety medical devices, had slipped into the red since the manufacture of safety syringes needed manual operations, entailing high costs.

"We will now be entering the safety syringes segment, with the US being an accessible export market," said Mr Himanshu Baid, Managing Director of the company.

More Stories on : Overseas Investments | Mergers & Acquisitions

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