Yash Birla Group, the Rs 3,000 crore engineering-to-education conglomerate, aims to complete a major restructuring of its various auto component arms by 2011-12.

The process which began last year would help the company harness better synergies and improve efficiency within group companies which have common customers, sourcing and similar products.

In its second phase, the reorganisation could involve merging shell castings maker Birla AccuCast with the BSE-listed tool holders and collets maker, Birla Precision Technologies (BPT).

It may also revive another group company Dagger Forst Tools (whose assets had been previously sold off) with a new product line.

“The current phase of restructuring is under the thought process, while we're also on the look out for acquisitions. We could combine them all into one firm, or if we see growth we can also keep them separate. We're looking to complete the process by the next fiscal,” Mr Sachin Sanghvi, CFO of both BPT and listed group flagship Zenith Birla, told Business Line .

He added, “There are a lot of inter-unit synergies, like a locational advantage of all the plants of the different companies being next to each other in Aurangabad.

The dealers and resources could also be combined and it will help us address new markets. Reorganisation would help us harness better ground-level operational efficiencies.”

Restructuring

The first phase of the restructuring last year had already seen cutting tool maker Indian Tool Manufacturers (ITM) being merged with BPT.

Moreover, small pipe maker Tungabhadra Holdings was merged with Zenith Birla.

“We started the merger process in 2008 as we wanted to consolidate our business which was severely affected by the global recession. It helped us improve raw material and market synergy as BPT's products are now being routed through ITM's dealers and vice-versa.

Many critical jobs in the companies were similar, while they both source alloy steel. Now, both ITM and BPT are posting operating profits,” said Mr Sanghvi.

He added that though ITM previously had 90 per cent domestic sales and BPT had 70 per cent exports, after merger, both companies could now de-risk their markets by having an even spread between domestic and global sales through common dealers. ITM's exports have now doubled, he said.

BPT boasts of clients like L&T, BHEL, Hero Honda, Bajaj, Knorr-Bremse, Cummins and capital goods company Kennametal and has 250 dealers across India.

A Tier II supplier for construction equipment and commercial vehicle makers, post merger with ITM it has also become a Tier I supplier for some customers.

Expansion

With expansions and new product lines in mind for this year, the group has allocated investments of around Rs 173 crore in both BPT and Zenith Birla.

This is being financed through both internal accruals and borrowings.

“We did not stop investments even during the slowdown as we had committed to certain clients like Cummins. Now that we see more stability in global demand, we're investing Rs 40 crore in BPT for expanding our product range and adding capacity. A further Rs 133 crore is being spent on Zenith Birla where we recently imported a saw mill from Australia,” said Mr Sanghvi.

>roudra.b@thehindu.co.in

comment COMMENT NOW