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Ashok Leyland ahead in race for Jessop stake

Indrani Dutta

KOLKATA, July 12

ASHOK Leyland Ltd (ALL) has emerged as the favourite in the race for acquiring a majority stake in Jessop and Company, the engineering outfit now going through the disinvestment process.

Sources told Business Line, that four companies other than ALL have expressed an interest in acquiring a 74 per cent stake (on a Rs 93 crore equity) that was on offer. They are Hindusthan Development Corporation (HDC), Titagarh Steel, Ruia Cotex and Srei Datre Corporation. All the companies other than Ruia are based here.

The city-based Development Consultants Ltd has been appointed the valuers while Luthra & Co have been appointed the legal advisors. The financial restructuring of the company, whose roots go back to 1788, is under process.

Sources said that, financially, ALL appeared to be the strongest contender as either by way of size or present financial status. ALL, which has several ex-Jessop personnel among its top brass (including a former Jessop MD), has already completed a due di ligence study. ``A team of six ALL executives camped here for 12 days doing this exercise,'' the sources said.

Explaining the reasons why Jessop has aroused investor interest, despite being a BIFR-listed company with accumulated losses of over Rs 300 crore, the sources said the outfit was still among the top engineering concerns and a composite unit.

Besides cranes, in which Jessop is considered a pioneer, the company makes heavy-duty container-handling equipment, as well as equipment for road construction, paper industry, and underground mining. It acts as the test house for roof-support systems use d in underground mining.

One of the major hurdles that Jessop faced was on account of its huge manpower. This problem has been addressed to a large extent through a VRS which pared manpower by nearly half.

The workforce strength, which now stands at 1,553, is expected to be reduced by another 48 employees because of the reduction in the retirement age from 60 to 58. Another 300 will retire in the normal course over the next two years leaving behind a lean organisation, the sources said. ``Consequently productivity will go up enhancing competitiveness,'' it was expected.

Already, a saving of Rs 1 crore was being made on account of wage costs. In the first quarter of 2001-2002, Jessop has reported a positive gross margin of Rs 26 lakh, the sources said. Turnover during this period, at Rs 16 crore, was Rs 7 crore higher th an the same period in 2000-01. It had Rs 66 crore worth orders on hand.