MUMBAI, April 7: The Rs 6,500-crore RPG group has chalked out a growth strategy incorporating mergers, acquisitions and divestments. The group will strive to strengthen its core businesses of power, telecom, tyres and retail marketing, while it will divest from some of the non-core areas over the next six months. Simultaneously, the group will also look at enhancing shareholder value, which the group perceives as one of the areas neglected in the past. This is aimed at increasing its gross market capitalisation.The specifics of the divestment programme has been kept under wraps, but it is learnt that the pace of divestment will be stepped up.
The RPG group, which grew through rampant acquisitions in the 1970s and 80s, has decided to be in a maximum of 20 businesses, with leadership in at least 12 areas by 2005. Revenue from the core segments should contribute 70 per cent to the group turnover, up from around 30 per cent.
The group has also decided to give priority to improve investor-perception. In arecent meeting of all chief executives and board members of different group companies, the group's think-tank decided that the issue of low market capitalisation of all group companies needs to be addressed immediately.
Despite a combined group turnover of Rs 6,400 crore, gross profit of Rs 500 crore and fixed assets of Rs 7,000 crore, the total market capitalisation of group companies is below Rs 800 crore. This will also affect realisations from the divestments. Group sources, however, said they weren't unduly worried of the group's low market capitalisation. "This is because in most of the group companies the promoters' stake is above 40 per cent," they added.
The RPG group had last year initiated the process of merging group companies when its three cable companies - Asian Cables, RPG Cables and Upcom Cables - were merged, followed by the proposed merger of its two transmission companies -- KEC International and RPG Transmission.
It is learnt that acquisitions will take a backseat for the time beingas emphasis will be more on divestment. Over the last three months, the group has sold its 34 per cent stake in RPG Ricoh in favour of the Japanese partner, as well as offloading its stake in RPG-BTP to its UK-based partner. Another joint venture company, Beninger, has been now lined up for divestment.
The group's think-tank is open to acquisitions at a later stage but only to strengthen its core businesses. For example, the group decided to consolidate Ceat Ltd's two-wheeler tyre business through the acquisition of Rado Tyres. The Rama Prasad Goenka-led group, over the last tow decades, had chose to expand through several high-profile takeovers which included those of CESC, Gramaphone Company of India, Dunlop India, which it later lost to Manu Chhabria, and Ceat Ltd among others.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
