Yash Birla to revive auto parts division

The Rs 2,500 crore Yash Birla Group has decided to revive its auto components division, which will include fresh investments and bringing its four operational units under one holding company.

The four auto component companies Birla Perucchini, Birla Kennametal, Dagger Forst and Indian Tools Manufacturers will operate under a common company.

The name of the new entity will be announced within a few weeks. Sources suggest that the new company may be called Birla Auto and Engineering.

The group would also look at listing this new entity on the stock market. Each of the four companies will also be renamed.

Company executives refused to comment on the issue.

The Birlas bought a controlling stake in Birla Kennametal from its joint venture partner, US-based Kennametal, in July. The group now holds 88.48 per cent in the company.

It also bought the stake of its joint venture partner Fonderia Perucchini Spa of Italy, in Birla Perucchini, for an undisclosed amount.

The firm manufacturers turbo-charger housings, rocker arm levers, hydraulic actuator cylinders and brake wheel cylinders for the components industry.

The other two companies, Dagger Forst and Indian Tools Manufacturers (ITM), in which the group already holds a majority, will be revived with fresh investments. ITM is a division of the Zenith Birla group, a part of the Yash Birla group.

Market sources say that about Rs 300-400 crore would be invested in this initiative. All four units are expected to double their turnover to Rs 360 crore in a year after the integration process is over.

"The integration could lead to a better demand-supply configuration with easy access to most of the common supplies of raw materials," said an industry analyst.

With the automobile industry growing at 15 per cent and expected to sustain that in the next five years, auto component manufacturers are looking to enhance their presence in the country substantially.

The auto components sector in India generated sales of $15 billion (more than Rs 60,000 crore) last year, $2.8 billion (about Rs 11,500 crore) of that in exports. The Auto Component Manufacturers' Association expects industry sales will swell to $40 billion (about Rs 1,64,000 crore) by 2016.

All four manufacturing companies have units in Aurangabad and cater to industry giants Bajaj, Hero Honda, Tata Motors, Hyundai as well as other component players like Bosch and Cummins.

Birla Perucchini, a joint venture started in 1997, will set up a greenfield unit in Jammu with a capital expenditure plan of Rs 25 crore. The facility will manufacture 800 tonnes of machined and unmachined castings monthly.

The unit will also produce 950 tonnes of unmachined sand castings in 2007-08, which will be increased to 7,600 tonnes per annum by 2010-11.

The new entity will also look at buying opportunities in the overseas market in the components sector.

Several Indian auto component companies are gearing up their operations, driven by the high growth in demand from developed markets of the US and Europe. Among these companies are Mahindra System and Automotive Technology (the auto component arm of Mahindra and Mahindra), Bharat Forge and Tata Auto Comp Systems (of the Tata Group).