Ceat Ltd, the RPG Group's tyre company, has embarked on a major restructuring of operations.
After facing prolonged investor criticism for its cross-holdings, the tyre major is sprucing up its balance sheet by transferring close to 90 per cent of its financial assets, including a Rs 200 crore (Rs 2 billion) investment portfolio, to other group investment arms.
A company executive said even the loans and advances portfolio of the company, which totals around Rs 468 crore (Rs 4.68 billion), will be spun off into one of the group's non-banking financial subsidiaries.
The executive added: "The problem was Ceat was viewed as a tyre company saddled with heavy investments. This was not appreciated in the markets. The realignment is to help focus on core activities."
Ceat will also merge the rubber division of group entity Harrisons Malayalam with itself. The move would improve its options on sourcing rubber, the raw material for tyres for its manufacturing activities and bring about synergies.
Ceat consumes around 45,000 tonne of rubber and Harrisons Malayalam produces 9,000 tonne. The buyout price has not been decided yet.
Consultants has been appointed for the valuation, Ceat executives added. Following the revamp, Harrisons Malayalam will focus on its core business area - tea and other food-related agro products.
Ceat is also planning to merge its financial subsidiary, Harrisons Malayalam Financial Services Ltd, and all other non-operational subsidiaries into itself.
Sources said the proposal would be presented to the committee of directors for recommendation. Depending upon the proposal, they may or may not modify the scheme of arrangement.
Ceat, one of the market leaders in the tyre sector till the early 1990s, had been severely affected by competition in the last few years.
It even dropped into the red, but managed a dramatic turnaround last year under new managing director Paras Chaudhury.
