Thaindian News

By Venkatachari Jagannathan
Chennai, Oct 1 (IANS) The Rs.15,600-crore diversified Murugappa group is planning major business expansion including acquisitions to more than double its turnover in five years, a top company official says.

According to A. Vellayan, the group’s vice-chairman and director (strategy), 60 percent of the targeted growth would be organic with acquisitions accounting for rest of the growth.

“Acquisitions will be in the fields of sugar, abrasives and pesticides,” Vellayan, who will take over as the group’s new executive chairman from M.A. Alagappan this month, told IANS.

“We will go for overseas buy if needed. The target company should either provide raw material or market for our products.”

As part of its growth strategy, he said, executives of various group companies had recently presented their five-year vision plans.

“The growth rate would vary for different business lines. Our idea is to be in the top two positions in the industries in which we operate.”

The 29 companies of the city-based group operate in diverse areas such as fertiliser, sugar, engineering, abrasives and financial services.

The group will fund the needed investments through a mix of debt (70 percent), internal generation, sale of non-strategic assets and promoter contributions, Vellayan said.

“We are not heavily debt-leveraged. The long-term debt-equity is less than one percent.”

The group also plans to raise Rs.420 crore to expand operations of its unlisted companies.

“We feel there is good scope in the construction, packaging and tea plantation segments. The cumulative turnover target for the unlisted companies this fiscal is around Rs.500 crore,” he said.

Asked about the group’s business experience in China, Vellayan said it was “not great”.

“It is difficult to operate in China as things work differently there. There is a general preference for domestic and Japanese companies.”

Vellayan was referring to the now defunct tie-up between the Murugappa group’s abrasives company Carborundum Universal and a Chinese firm.

The Chinese partner decided to go it alone, leaving Carborundum to begin dividing the joint venture’s assets. “We are looking at mid-course correction. Six months from now, there will be more clarity.”

He also dismissed reports that the group was looking at offloading its 34.78 percent stake in its non-banking finance company (NBFC) Cholamandalam DBS Finance - a joint venture with DBS Bank of Singapore.

Arguing that an additional Rs.150 crore had been infused into the NBFC last fiscal, Vellayan said: “It is wrong to say we are exiting the financial services business. We still believe there is good potential in this field.”

However, Chola DBS recently sold its mutual fund business for Rs.45 crore to L&T Finance, on the ground that asset management was not its core business.