Murugappa Group To Exit 18 Areas In Core Thrust

The Rs 2,900-crore Murugappa group has decided to pull out of around 18 businesses it now owns and manages, to concentrate on nine core areas, as prescribed by the Indian arm of McKinsey & Co.

The nine areas identified as core businesses for the group are fertilisers, cycles, tubes, chains, confectionery, abrasives, sanitary ware, sugar and financial services. According to McKinsey, the group has potential for value creation and can become market leaders in all these areas.

The group has identified construction, property development, plastic fabrication, electronics and trading as areas from where it will exit either through outright sale or by spinning them off into joint ventures with the management control in the hands of the partners. There are other smaller businesses owned and managed by the group from which it has decided to withdraw.

 

Talking to Business Standard, A Vellayan, managing director of one of the group's cash cows, the Rs 620-crore Tube Investments of India, said: "The restructuring prescribed by McKinsey is aimed at value creation and will help the group become a global player in the core areas." There is also a plan to establish a holding company for the group, which is now controlled by the Murugappa family through a number of investment firms and cross-holdings. However, Vellayan, son of group chief executive officer M V Subbiah's brother A M M Arunachalam said, "no decision has yet been taken as the process of establishing a holding company is fraught with a whole lot of issues".

The businesses and human resource development issues of the group are overseen by a corporate board consisting of the presidents of all its businesses. The board has 11 members of which five are family members and six are professionals. As part of the overall restructuring of the Chennai-based behemoth, TI Ltd, has embarked on a downsizing and delayering exercise under which it is laying off 22 per cent of the managerial cadre across its four divisions with a voluntary retirement scheme estimated to cost Rs 12 crore.

TI _ whose BSA brand of cycles is the market leader with 55 per cent share in the sports light roadster (SLR) segment of cycles _ has several autonomous divisions, each vertically integrated and supported by ancillaries.

Among the divisions, TI Cycles manufactures speciality cycles, while Tube Products makes high frequency welded and cold drawn welded steel tubes. Other divisions include the roll form division and TI Diamond Chain, which is the largest manufacturer of chains.The Rs 781-crore EID-Parry (India), taken over by the Murugappa group in 1981 is a major force in the phosphatic fertilisers and hybrid seeds segment.