HMT to consolidate

Beleagured public sector watch-to-tractor maker HMT is in a consolidation mode. The company and its six subsidiaries are merging their 23 core divisions and more support units across the country to form about eight integrated industrial complexes.

The regrouping of divisions while enhancing administrative efficiencies, will result in 5-10 per cent cost savings.

With the cost bill running to Rs 650 crore on a topline of Rs 509 crore (2003-04), the move is expected to provide some liquidity relief to the cash-strapped concern.

M S Zahed, chairman and managing director, said, "We target to complete the rejigs within a year. After which we will ascertain the surplus infrastructure which will consequently be disposed off and the proceeds used for technology investments and to clear debts."

The company already has surplus land worth Rs 1,000 crore and this figure will go up after the consolidation. Efforts to sell part of the surplus land have yielded results and the company has realised Rs 110 crore.

The proceeds, he said, have been set off against the Rs 1,330 crore book debts.

HMT has now nearly completed the integration of its watch and machine tool units at Bangalore and the machine tool capacity at Hyderabad.

It is now restructuring its other units in states like Kerala, Uttaranchal and Haryana. This move, besides ensuring optimal utilisation of capacity, will allow for better coordination between the marketing, development, production and administrative arms of the complexes, Zahed said.

He added that almost all the support units earmarked for regrouping have a lifespan of around 10 to 15 years and were formed based on the assumption that smaller entities meant effective control.

However, over the years, these units, treated as separate cost centres, have run up huge overheads, escalating the company's loss.

An internal study has revealed that while the merger of several units will cut administrative and personnel overheads, the operations will remain unaffected.

Officials added that the reduction of the workforce from 23,000 to less than 11,000 has had a catalytic reaction.

While changes to the company structure met with little resistance, units also had to accept relocation of workforce from other plants as they had to ensure capacity utilisation.

HMT focuses on three business segments "" Watches, Tractors and Machine tools. It has seven core machine tool divisions, seven watch units and several engineering units, besides an export-oriented trading concern called HMT (International).

The company has also appointed UTI Bank to suggest methods to restructure high cost debts.

While HMT's interest rates range between 9 and 13 per cent, the company aims to bring it down to less than 8 per cent.

---

Powering ahead

• Integration of watch and machine tool units in Bangalore and machine tool capacity at Hyderabad.
• Restructure units in Kerala, Uttaranchal and Haryana.
• UTI Bank to suggest methods to restructure high cost debts.