‘Indian economy cannot go down any further and should recover in about six months’

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: and margins came under severe pressure. Yet, in a span of four years (2002-2006), Pennar achieved a remarkable turnaround with profits in six successive quarters starting from March 2005. Sales shot up to Rs 647 crore in the 16-month period ending July 2006 (annualised amount was Rs 485 crore). Last year, we did a turnover of Rs 641 crore and this year it is likely to touch Rs 800 crore. Our plan is to take it up to over Rs 1,000 crore by 2009-10.

How did the turnaround happen? Did you look at business restructuring to bring back the company on the growth path?

The turnaround started from 2002 onwards. The company had a study done by Deloitte, Haskins & Sells and their recommendation was that the company should move towards value-added products to restructure its business. So, first, we worked on business restructuring. Prior to the downturn period, nearly 80% of the company’s product mix came from cold rolled steel and only 20% was from value-added products like cold form profiles and components. Then we started focusing on newer areas, more value added products, more engineering and knowledge built into it. We have been largely very successful in the business restructuring exercise. Currently, nearly 60% of our turnover is from value-added products and the balance 40% is from cold rolled steel products. By 2009-10, our goal is to make it 70% value-added products and 30% cold rolled steel products.

What were the other areas of focus in the turnaround process?

We also looked at productivity improvement and financial restructuring. It was important. In the case of productivity improvement, we looked at all aspects of the company like operations, rationalisation of production, including manpower. As a result, we saw improvement in all areas, including machines, people, capital, inventories and receivables management etc. We also did financial restructuring by bringing down the debt component.

In 2003, our debt component was to the tune of Rs 245 crore and today the total long- term debt is only Rs 30 crore. We achieved this with the help of foreign investment. Last year, we got money from two foreign funds—Eight Capital and Spinnaker Capital—to the tune of Rs 122 crore. We used the funds to repay all the term loans taken from financial institutions and banks.