GK Pillai, Managing Director and CEO of Walchandnagar Industries Limited looks to demerge the company into three different units – manufacturing, engineering procurement construction (EPC) and engineering.
In addition, the firm will form a joint venture (JV) with Russian company AEM for nuclear business opportunities, as they see huge potential in nuclear space, he says in an interview to CNBC-TV18.
Meanwhile, Walchandnagar Industries is also working with PwC to study various defence opportunities, he adds.
Below is the verbatim transcript of the interview:
Reema: The company plans to demerge its business into three separate arms, is that something that the company is for sure going to do? If yes what would the timeline as well as the rationale for it be?
A: The company’s philosophy now is that we have been basically an heavy engineering equipment manufacturer. We had also browsed into the EPC sphere so what we are now thinking is the overall business of the company should be in three phases – one our core strength of manufacturing, second in terms of the EPC businesses and third we want to have a separate identified engineering division of the company. These are the three pillars of Walchandnagar Industries (WIL) which you will see in the very near future.
With regard to the demerger as it is we have not firmed up yet but the thought process is there. At an appropriate and opportune time we will be taking a call on it.
Sumaira: Any concrete orders or something that has come out of his visit to India? Are you planning to visit Moscow, how will things be revived for you post this visit?
A: As far as our relationship with Russian AEM, with regard to nuclear equipment manufacturing has been concerned we did tie up with them almost 2-2.5 years back but the complete nuclear business was in some sort of doldrums for almost last 2.5 years. After the recent visit of President Putin to India there has been a big change in the thought process of the government.
With the Kudankulam three and four again coming up very soon we are hopeful that our association with AEM will take form very soon. We are in touch with them and we are also as you rightly said a team from Walchandnagar Industries will be very shortly visiting Russia to discuss with them and go for the next step.
Reema: Is it a 50-50 JV, will you form a new SPV and what is the kind of opportunity that you see?
A: In terms of opportunities in the nuclear business we find that once this present situation goes through there will be a huge potential for the nuclear business both in India as well as even outside the country. We do have a plan to setup this JV at Dahej where we already have obtained a land which is a shore based land with a waterfront because nuclear equipments will be large in size. With regard to the formation of what type of JV, certain discussions had taken place but still it has to be re-discussed once again in the present context.
Reema: This will be a JV with the Russian government or will it be with some Russian private company?
A: It will be with a Russian company but that is part of the government. The company is known as AEM. So, basically it will be with one the Russian company which is part of the Russian government.
Sumaira: Coming back to your own business four of the last six quarters has not been good for you; you have seen a lot of impact in terms of input costs, interest costs, employee costs. Are things getting better for you on the ground?
A: The last two years the company has been going through a very difficult phase. If you look at my results which were just over in September 2014 when compared to the year-on-year of the previous year there has been definitely a good improvement in terms of the overall PBT, from a loss of almost Rs 38 crore we have come down to almost Rs 18-19 crore. So, there has been an improvement in overall performance of the company but there are certain reasons on account of which the topline growth has not happened and at the same time the bottomline has also been affected.
Reema: We understand that the company has hired PwC as a consultant to chalk out a strategy for making products for the defence sector. Is that true and what is the kind of investment that you have laid out to make these new products?
A: If you look at WILs overall portfolio, we have been in the defence business for quite sometime and with the opening up of the defence segment more for the Indian companies we thought this is the most opportune time for us to really go big into the overall defence market. The market is so large so instead of just entering into any area or all areas we thought it makes sense to have detailed analyses of overall market, look at our strengths and where we should really make a foray. For this we working with PwC, they are working with us and for making out a detailed defence business strategy for WIL which will be a very important segment of our business in the near future.
Reema: One word on this demerger, is that something which could happen – I know you said that you have not finalised it and it is under consideration but is it likely that things could move fast and close in FY16 itself?
A: I can’t promise a timeframe as of now but looking into both the segments of the business one is a pure hi-tech manufacturing and second is an EPC business. Both the business in reality if you look at it, it is two different ballgame. So, a demerger will definitely help both the businesses to work parallel on their own way. Though I am not able to give a timeframe but we are internally working very closely with regard to making this happen at the earliest.
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