After bruising second and third quarters, Viren Sinha, who took over as chairman and managing director of mini ratna Balmer Lawrie on January 1, 2012, saw some positive signs in January. The highly diversified PSU—it’s into industrial packaging, greases and lubricants, performance chemicals, tours & travel, logistics infrastructure, logistics services, tea, and refinery & oilfield services—had 60% of its turnover (R2,018 crore in 2010-11) coming from services, and Sinha, who has been with the company since 1980 and has worked in several business units, wants to grow both the manufacturing and services units of Balmer Lawrie. “We are expanding our logistics infrastructure business. We have rebranded our travel & tours business and are focusing a lot on different types of rolling oils”, he says. Sinha admits that there are challenges—“the travel industry is going through a churn; and the manufacturing sector saw one of its worst phases in Q3”—but, in his first interview after taking over as CMD, he says the company is on course to grow to a R3,500-crore PSU by 2015. Excerpts:
In the second quarter, Balmer Lawrie had plans to acquire tour & travel companies to expand the existing business. What is the status of that?
We are looking for acquisitions, but we need the right company at the right price. We are strong on ticketing, and need to build on our tours unit, so acquiring a tour company isn’t a bad idea. We were talking to a tour company but the price didn’t suit us and we had to drop it. Tours and Travel is an important part of our business; it contributed Rs 874 crore to revenues last fiscal. While it adds significantly to the top line, margins in the travel industry are wafer-thin, only 3%, and thus it contributes very little to profitability. On top of that, our clientele is mostly government and PSUs, and collection is a major issue.
Balmer Lawrie is a diversified PSU, present in many categories. Is the tour & travel business your focus area at present?
Yes, there is tremendous potential in tours & travels and we have rebranded the segment by doing the following: opened a 24/7 call centre; launched our online portal; and launched a new website that hosts a number of tour packages. Our unique selling point is that we are a government company and will not go bankrupt overnight like we saw what happened to Spanair some days ago. Also, online travel agencies charge hefty cancellation charges once you book through them, we are not going to do that, we will not charge anything extra, only take what the airline charges. We sell half a million tickets every year and that gives us a huge base for our tour business. We will target and focus on them. Travels and tours don’t add significantly to the bottom line, but makes a huge difference to the topline.
Can you please give us a view on your other businesses?
The logistics business is our biggest contributor to profits. We are looking at setting up logistics hubs. We are actively pursuing a proposal sent by the Vizag Port Trust. We wanted to set up one in West Bengal, at Dankuni.
But we didn’t get the 48 acres that we needed for the project. We identified the land, but ran into hurdles like the Urban Land Ceiling Act and so forth. We have applied to the government for an exemption, but we are yet to get a response. We had to drop the project, and we are looking at other places like Vizag. We are also in the process of appointing a consultant to tell us about the possibilities of setting up cold chain logistics.
In logistics services, too, we are looking at ocean freight as a thrust area besides expanding our existing lines of business like air cargo and so forth. We have opened logistics services offices in Goa, Bhubaneswar, Ludhiana and are expanding the market reach in every possible way.
What is your capex plans for the year?
We have approved a major investment for a throughput barrel plant in Maharashtra. The investment will be made from internal resources, but I can’t reveal the details just yet.
What are you doing to improve your operational efficiency?
We are setting up an ERP for our organisation—TCS is doing it for us. It’s a three-year project because each of our divisions is a separate entity and it will take time to bring them under one umbrella. We are doing this with an aim to improve the supply chain, procurement, distribution efficiencies, with a focus on bringing down costs.
But two of your units, travel and manufacturing, are dependent on several external factors...
It’s quite challenging—the travel industry is in trouble and the third quarter has been one of the worst in manufacturing. Our grease & lubricants and industrial packaging units have been hit and order books are not healthy.
But we have seen some positive signs here in the last one month. With leather exports down due to the economic meltdown in the US and Europe, our leather chemicals business is also not going to perform well this fiscal. In grease & lubricants, we are augmenting capacities at Chennai and Silvassa.
We are looking at speciality lubricants and also focussing on different types of rolling oils. Despite the challenges, we have a positive outlook for the coming fiscal. We are on course to be a Rs 3,500-crore company by 2015.
In the second quarter, Balmer Lawrie had plans to acquire tour & travel companies to expand the existing business. What is the status of that?
We are looking for acquisitions, but we need the right company at the right price. We are strong on ticketing, and need to build on our tours unit, so acquiring a tour company isn’t a bad idea. We were talking to a tour company but the price didn’t suit us and we had to drop it. Tours and Travel is an important part of our business; it contributed Rs 874 crore to revenues last fiscal. While it adds significantly to the top line, margins in the travel industry are wafer-thin, only 3%, and thus it contributes very little to profitability. On top of that, our clientele is mostly government and PSUs, and collection is a major issue.
Balmer Lawrie is a diversified PSU, present in many categories. Is the tour & travel business your focus area at present?
Yes, there is tremendous potential in tours & travels and we have rebranded the segment by doing the following: opened a 24/7 call centre; launched our online portal; and launched a new website that hosts a number of tour packages. Our unique selling point is that we are a government company and will not go bankrupt overnight like we saw what happened to Spanair some days ago. Also, online travel agencies charge hefty cancellation charges once you book through them, we are not going to do that, we will not charge anything extra, only take what the airline charges. We sell half a million tickets every year and that gives us a huge base for our tour business. We will target and focus on them. Travels and tours don’t add significantly to the bottom line, but makes a huge difference to the topline.
Can you please give us a view on your other businesses?
The logistics business is our biggest contributor to profits. We are looking at setting up logistics hubs. We are actively pursuing a proposal sent by the Vizag Port Trust. We wanted to set up one in West Bengal, at Dankuni.
But we didn’t get the 48 acres that we needed for the project. We identified the land, but ran into hurdles like the Urban Land Ceiling Act and so forth. We have applied to the government for an exemption, but we are yet to get a response. We had to drop the project, and we are looking at other places like Vizag. We are also in the process of appointing a consultant to tell us about the possibilities of setting up cold chain logistics.
In logistics services, too, we are looking at ocean freight as a thrust area besides expanding our existing lines of business like air cargo and so forth. We have opened logistics services offices in Goa, Bhubaneswar, Ludhiana and are expanding the market reach in every possible way.
What is your capex plans for the year?
We have approved a major investment for a throughput barrel plant in Maharashtra. The investment will be made from internal resources, but I can’t reveal the details just yet.
What are you doing to improve your operational efficiency?
We are setting up an ERP for our organisation—TCS is doing it for us. It’s a three-year project because each of our divisions is a separate entity and it will take time to bring them under one umbrella. We are doing this with an aim to improve the supply chain, procurement, distribution efficiencies, with a focus on bringing down costs.
But two of your units, travel and manufacturing, are dependent on several external factors...
It’s quite challenging—the travel industry is in trouble and the third quarter has been one of the worst in manufacturing. Our grease & lubricants and industrial packaging units have been hit and order books are not healthy.
But we have seen some positive signs here in the last one month. With leather exports down due to the economic meltdown in the US and Europe, our leather chemicals business is also not going to perform well this fiscal. In grease & lubricants, we are augmenting capacities at Chennai and Silvassa.
We are looking at speciality lubricants and also focussing on different types of rolling oils. Despite the challenges, we have a positive outlook for the coming fiscal. We are on course to be a Rs 3,500-crore company by 2015.
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