Yash Birla group eyes PE fund

In a bid to grab a larger pie of the 71,000-crore (Rs 710 billion) auto components segment, the Rs 2,500-crore (Rs 25 billion) Yash Birla group has decided to revitalise its auto tool business by infusing equity capital through an initial public offering (IPO) for a proposed holding company.

The group is also looking at acquisitions to beef up the business. Dinu Poonacha, group president, corporate strategy and planning, said, "A number of proposals involving different auto component companies have been put forward (to us) by investment banking firms for takeovers. We are evaluating all the proposals."

The group has also set aside investments for enhancing capacities at all facilities at its four companies. Birla Kennametal, Birla Perucchini, Indian Tools Manufacturer (ITM) and Dagger Forst will together see an investment of Rs 120 crore (Rs 1.2 billion) over the next 18 months.

"The capacity augmentation will basically cater to our existing commitments. Its investment will not be a part of the extension of further growth for the business," added Poonacha.

The group is looking to double its turnover to Rs 400 crore (Rs 4 billion) by 2009-10 from the four companies which jointly contributed Rs 200 crore (Rs 2 billion) last year.

Although the group may look for an IPO for the holding company, it is exploring share swap options for two of the listed companies.

Ernst & Young (E&Y) is advising the group on the financial restructuring and a final report is expected by mid-January. A change in the operating structure will also be a part of the rejig that will involve induction of new personnel into the four companies  or the main holding entity.

 The new entity will have a head for each of the different verticals like manufacturing, IT and HR, that will be common for all the companies.

Meanwhile, the group has got shareholder approval to rename Birla Kennametal as Birla Precision Technologies. Birla Perucchini will also be renamed by month-end.

These companies make shell moulded products, precision machine tools, broaches and HSS cutting tools, all of which are used in either making the end products for vehicles or a part of the machine which makes the components.

"The integration could lead to a better demand-supply configuration with easy access to most of common supplies. It will also help the group to focus on limited number of clients and enhance productivity," said an industry analyst.

The group companies supply Cummins, Bosch, Eaton, Tata Motors, Hyundai among others.