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BEML may hive off technology division

business Updated: Jul 11, 2007 02:45 IST
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Public sector defence equipment maker Bharat Earth Movers Ltd is planning to hive off its technology division into a separate company.
The technology division is a strategic business unit undertaking engineering and design works for the railway, metro rail and defence sectors.

The spinoff is aimed at separating the IT division from the core business activities of mining, construction and earth moving, informed sources said.

The division carries out engineering design works for engines, transmissions, axles, hydraulic pumps, cylinders, control valves, rail bogies and car bodies. It employs around 500 people.

BEML Chairman and managing director VRS Natarajan said the hive-of is a possibility, but not in the immediate future.

"The technology division has the capability of becoming a separate entity. The division is doing extremely well. But hiving off the division will not happen in the very immediate future," he said.

BEML set up the technology division last year.

Analysts say BEML may follow the Tata model, in which the company has formed Tata Technologies, which provides engineering design services as a separate entity.

"Now a lot of orders are coming in the automotive, rail and aerospace sectors. Being a separate entity, the BEML technology division can independently take those orders. And once the division achieve the revenue targets, BEML may list it after a couple of years," said a Mumbai-based analyst with Edelweiss securities.

The BEML Technology division is competing with private players like Tata Technologies, Infotech Enterprises and KPIT Cummins. The engineering design services market is estimated over $4 billion and is expected to grow by 15-20 per cent year-on-year, he said.

BEML recently raised Rs 450 crore through a follow-on public issue.