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Wednesday, April 25, 2007

HMT subsidiary plans turnaround by FY08

HMT Machine Tools, a subsidiary of the Bangalore-based HMT group, is expecting to make a turnaround in 2007-08. The firm recently secured a Rs 880-crore revival and restructuring package.

“With cash infusion and waivers totalling Rs 880 crore, the negative networth of HMT Machine Tools will become positive and interest outgo will become zero. In this way, we are expecting to clean up our balance sheet within a year and make a turnaround in 2007-08,” A V Kamat, chairman and managing director of HMT, said.

In 2005-06, the machine tools division achieved Rs 242.18 crore turnover and reported a loss of Rs 6.56 crore.

In 2006-07, the division has posted Rs 263.32 crore turnover, which is about 40 per cent of the group’s turnover of Rs 611.09 crore. The final results are yet to be approved but sources said the losses have come down.

The revival and restructuring package includes conversion of debt into equity, waiver of interest and cash injection of Rs 723 crore. This consists of Rs 443 crore to repay old loans, Rs 180 crore in the form of equity share capital infusion from the Centre towards capital expenditure and modernisation and a soft loan of Rs 100 crore on 3.5 per cent interest for reduction of manpower.

HMT Machine Tools pays around Rs 60 crore towards interest every year. To support this, the company needs to have a turnover of at least Rs 500 crore.

Of the revival package, Rs 180 crore will fund investment in various units of HMT Machine Tools for refurbishing plants, modernising foundries and upgrading machines which are almost 50 years old.

Kamat said, “Even though we have the design capabilities, we are not able to manufacture world-class machines of desired accuracy today. We have identified certain critical areas and are working on refurbishing and modernising.”

The company is planning to talk to research institutes such as Fraunhofer Institute in Germany to acquire new technologies in areas such as high-speed machining centre, water-jet technology and laser technology. The company is readying assignments for such research-oriented institutes to identify the technology gaps and devise packages to fill them.

With the Rs 100 crore earmarked for the reduction of manpower, HMT Machines Tools intends to bring down its headcount from the present 4,300 to 3,000 and reduce its wage costs from Rs 120 crore to Rs 100 crore per year.

HMT Machine Tools owns five manufacturing plants in the country. The company has prepared a blue print to implement an enterprise resource planning (ERP) package to network all its plants.

Of the six subsidiaries of HMT, HMT Bearings and HMT Praga have already received revival packages from the government. The company is expecting a package from the Centre for the revival of its tractor business.

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