The Hindu Business Line : HMT plans to launch MUVs, LCVs

FINANCIALLY troubled state-owned watches-to-tractor maker HMT Ltd plans to launch multi-utility vehicles (MUVs), and light commercial vehicles (LCVs) in a year in its bid to diversify product offerings and utilise its existing resources to generate better returns.

The company plans to utilise its tractor manufacturing facilities to produce these indigenously designed vehicles along with planned roll-out of light duty earth movers, the Chairman and Managing Director, Mr M.S. Zahed, said.

HMT will source Isuzu engines for its MUV and is likely to enter into a pact with Hindustan Motors, he said. "We will target rural and semi-rural markets with our MUV and LCVs," he said, adding that prices of such vehicles are likely to be less than Rs 5 lakh.

"We will be able to keep the prices low since we plan to outsource close to 90 per cent of the components," he added.

HMT has set a target of Rs 800 crore from its automotive business by 2008, of which Rs 500 crore will be contributed by MUVs and LCVs and the remaining Rs 300 crore will come from tractors, Mr Zahed said.

The company is mulling an initial share sale to fund this project.

However, the IPO plan needs Government clearance and the size of the issue is yet to be finalised.

"We will look at IPO to fund this greenfield project," Mr Zahed said.

In case the share sale plan gets stuck, the company is likely to raise the necessary funds through institutional borrowings, he added.

HMT has appointed UTI Bank to suggest financial restructuring in order to get rid of its high-cost debts and clean up the balance sheet to attract financing from global as well as local lenders.

The bank has submitted two draft proposals and "we are going through them before we place them for the board's approval in a month," Mr Zahed said.

"We have an asset base of over Rs 2,000 crore, with surplus land asset over Rs 1,000 crore and HMT brand valued at Rs 1,000 crore," he said.

The company is currently in the process of selling part of its land holdings and setting off the proceeds from such sales against its debts. HMT has close to Rs 1,330 crore debts on its books and continuously seeks to retire the high-cost debt.

"The Government has given us some targets and we are trying to follow them," Mr Zahed said. "Till date we have raised Rs 110 crore through sale of land and set off the proceeds against our borrowings," he added.

Commenting on future plans of its struggling watch unit, Mr Zahed said that the company will try to revive this unit with new high-value product offerings at higher price points and seek to launch "measuring products" for sunrise life sciences industry to boost sales.

The company has set a target of Rs 115 crore of turnover for the current fiscal for the watch division, up from Rs 65 crore a year ago.

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