IBP Co Ltd, a subsidiary of Indian Oil Corporation (IOC), has appointed international consultant majors KPMG and Ernst & Young (E&Y) to evaluate the engineering and chemicals businesses of the company, respectively. The reports would be submitted by September this year.
"The consultants have been appointed to turn these two units around to make them viable business entity. They have been given the mandate to come out with best possible solution for these units. IBP board will decide on the next course of action after the reports are submitted," R S Guha, director (marketing) of IBP said.
The consultants will look at every possible way to add value to the company. They will study the option of hiving off the chemicals and engineering groups altogether from IBP. They are also free to suggest to go for joint ventures through induction of strategic partners.
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"We are open to all suggestions. However, the recommendations are not binding on IBP. These units have been with the company for a long time. The decisions would be taken in the best interest of IBP," Guha pointed out.
At present, chemicals and engineering businesses contribute less than 2 per cent of the company's total turnover, with petroleum products being the main revenue earner. For the year ending 2001-02, chemicals and engineering businesses contributed Rs 109.63 crore and Rs 11.27 crore, respectively, as against sales of Rs 8,331.67 crore from petroleum products. Both units also recorded losses in the last fiscal to the tune of Rs 23.71 crore and Rs 7.28 crore, respectively.
The chemicals business, which manufactures and markets industrial explosives and accessories, enjoys 20 per cent marketshare in the country. It has two units at Singrauli and Korba.
The engineering business manufactures and markets cryogenic containers for industrial and biological applications. There has been sharp decline in sales of cryocans and cryovessels last fiscal due to sluggish demand. The company has carried out a cost reduction exercise to turn it around.
Guha said international consultants would bring knowledge about the domestic and international climate as far as the product portfolio are concerned. "The petroleum business is on a solid footing. We have strong reserves of Rs 424 crore. We will go all the way to support the two divisions," Guha noted.
In the first quarter this fiscal, chemicals business suffered a loss of Rs 1.5 crore on sales of Rs 23.84 crore while engineering division made meagre profit of Rs 53 lakh on sales of Rs 4.27 crore.