Tube Investments India to demerge manufacturing, finance arms by June: MD

TII MD L Ramkumar also talks about how the company intends to incubate, execute new ideas

Tube Investments of India (TII), one of Murugappa Group's major businesses, last year decided to demerge its manufacturing business undertaking, including manufacture of tubes and components, bicycles and fitness products and chains for auto and industrial sectors, into a wholly owned subsidiary called TI Financial Holdings Ltd. Currently, it is also looking at investing in start-ups and has evaluated a few already. In an interaction with Gireesh Babu, TII Managing Director (MD) L RAMKUMAR explains the strategy and plans of the company. Edited excerpts:

What is the status of your plans to demerge the manufacturing business?

Today, TII is a manufacturing company holding shares in insurance (Cholamandalam MS General Insurance) and non-banking financial institutions (Cholamandalam Investment and Finance Company). For an investor who looks at TII, they do not know whether it is a manufacturing company or a financial services company. Normally, investors like to have a focused investment. For a long time, we have been thinking to give this option to the shareholder. Besides, manufacturing and financial services are different and they have different types of investors and money raising. We are splitting the company into two. One portion will be finance and insurance and the other portion will have all the manufacturing activities. In the future, it would be easier for the investor and the management. We have got the Company Law Tribunal's approval and we are going to seek shareholders' approval in a meeting in the middle of April. We hope that by June-end the whole thing should be done with. Then, there will be two companies.

What would be the changes in the management of the company?

There will be two boards. Today, there is a separate MD for Chola Finance, there is a MD for Chola Insurance and a MD for TII. Tomorrow, there will be a board on top of Chola Finance and Insurance. Its constitution will be decided in due course of time. The TII board will continue. Perhaps we will get some new people and some of the existing members might go to the board of the financial services company. From a management perspective, this would give more focus to the respective businesses.

You have formed the Corporate Strategy Group, which acts as an incubator for new business ideas. What do you expect from it over a period of time?

I am not able to put a number to it, which we might do after an year or so. We are looking at opportunities which require a lot of detailed study. We did the Brooks Bicycle online business from scratch, looking at various aspects of the business. Similarly, we could look at other sectors also, such as the manufacturing side. We have various skills in TII with tubes and metal forming and we can look at offering products to other businesses with this. Largely, we cater to the auto industry, but we are also looking at the agricultural sector — in mechanisation, where we can make some parts. While we do not know much about it, the group will do the market research, consumer research and the skill sets required. Once that is done, they will hand it over for execution and investment.

Chola Finance has recently invested into a start-up. Is TII looking at investing in start-ups?

We don't mind if it is going to add some value to us. In terms of technology or market reach, if it is going to add value, we will look at it. We have looked at a few in the service side, automotive and others, but we have not finalised anything. That could also be part of the Corporate Strategy Group.

How will the goods and services tax (GST) regime help you and what are the preparations for the transition?

Generally, we expect next year should be better. I think, except for the initial implementation problem, GST would be good for us. This is because procedurally, it will become easier. We have not yet estimated its benefit, but I think we will indeed benefit from it. There could be some initial teething problems but I think we can overcome that. For instance, component makers in the bicycle industry are not very sophisticated or organised and they are not an excised commodity. We are doing a lot of training now. We are conducting workshop for them on how and what they should do and how it will benefit them.