PTL takeover gives 100 firms reason to smile

Component makers bank on the new management to expand business.

The acquisition of a 43 per cent stake by Mahindra and Mahindra in Punjab Tractors Limited (PTL) is likely to give a new lease of life to more than 100 SMEs, engaged in the manufacture of tractor components, located in the industrial area of Chandigarh.

The change in ownership, supposedly, will bring back old patrons (read auto ancillary units) who had taken up orders of other firms during the deceleration days of PTL, to the company.

"We (PTL and Mahindra and Mahindra) will not act as promoters but as partners," said a Mahindra and Mahindra official.

Mahindra and Mahindra is hoping to get more orders for Mahindra and Swaraj tractors, as part of its PTL takeover plan. When a team from Mahindra and Mahindra recently announced its intention to capture 50 per cent share of the Indian tractor market, entrepreneurs running PTL ancillaries were hopeful of getting more business.

However, the ancillaries are unhappy over the policies of the Chandigarh administration that are deterring the growth of manufacturing units in the industrial area. The administration announced the conversion of commercial plots in September 2005. According to it, an industrial plot can be converted into a commercial site at the rate of Rs 20,000 per square yard. The industrial units are allowed a floor area ratio (FAR) of 0.75 while for commercial ventures it is 2. The apathy of the local administration has uprooted many tractor ancillaries from Chandigarh and forced them to relocate to adjoining areas like Mohali and Panchkula.

"With the coming in of Mahindra and Mahindra and seeing its keenness to restructure PTL, we are certain that business will grow. Hence, we plan to expand our operations. Since we do not have the support of the Chandigarh administration, we plan to expand in Mohali where the PTL facility is situated," said an ancillary unit owner. He added that proximity to the facility would help it in the long run and offset overhead expenses.

During PTL's hard days, many ancillaries diversified into manufacturing components for Rail Coach Factory, Kapurthala. "Dislocation from Chandigarh can be viable as we will be closer to our destinations. "We are sure that PTL will increase its trade volume, so we can bank on it," said another ancillary unit owner.

PTL is now operating at a sub-optimal capacity, as it is in the process of clearing its inventory stocks which piled up due to marketing mismanagement. However, the SMEs are optimistic because the company has set a target to sell around 25,000 -30,000 tractors this fiscal and is likely to revise it next year.

The synergy with Mahindra Finance would spur demand and increase production. "Although PTL had tie-ups with most of the banks it did not pursue it aggressively, as a result sales remained stagnant. But a group company like Mahindra Finance is expected to do more legwork to achieve the sales target," he added.

So the SMEs attached to PTL are set to bounce back with full vigour. "We are waiting for the formal announcement by the company board about its future strategy, so that we can increase investment in our present ventures," an ancillary unit owner said.