Exide tightens belt, targets 10 per cent cost reduction

Kolkata, May 16: IN the face of cheap imports putting pressure on its margins, Exide Industries Ltd (EIL) is all set to tighten its belt and streamline operations targeting a 10 per cent reduction in overall expenses to boost up its sagging bottomline this fiscal.

The company, in consultation with its strategic and technology partner Shin Kobe of Japan, has set up separate task force and a multi-disciplinary team to carry out the massive cost reduction exercises, EIL managing director TV Ramanathan said.

The largest lead-acid battery manufacture in the country, which suffered a 15 per cent decline in net profit at Rs 41 crore last fiscal, has targeted to reduce the total expenses (excluding materials) by 10 per cent from last year’s Rs 300 crore, he said.

The cost-cutting drive envisaged strict monitoring of all expenses in departments like purchase, engineering, accounts, commercial as also tougher norms for new recruitments. It has also imposed value addition and accountability criteria for its employees including senior management staff.

The company has identified 10 per cent to 15 per cent of the management staff to be groomed as future leaders. Promotions, in some cases, has been linked to additional responsibilities.

While asserting that these measures would significantly improve cost efficiency, he, however, said: “We still cannot match the cheap imports unless the anomalies in the import duty structure on lead and finished batteries are removed.”

The current duty structure imposes a 35 per cent tariff both lead and finished batteries, thus raising the production cost for domestic manufacturers vis-a-vis others.

“If the government does not remove the duty anomaly, we have to either close down or shift our base to countries like China and Bangladesh,” Mr Ramanathan said.

However, despite the cheap imports eating up marketshare, the company expected a sales growth of 10 per cent to 12 per cent during 2001-2.

“This, along with the improved cost efficiency, would result into a growth in net profit that will be higher than the sales growth,” Mr Ramanathan said.

Exide recorded a net sales of Rs 770 crore last year. The focus areas for the company for the current fiscal would be the commercial vehicle segment and the rural market of tractors, he said. (PTI)