RPG Group companies in cost-cutting juggernaut
The Rs 15,000-crore sales RPG Group, which has an empire spanning everything from Ceat tyres to the Spencer’s retail chain, says it has effected a big round of cost-cutting to brace the economic slowdown and is now looking ahead to surge again, reports Lalatendu Mishra.business Updated: Apr 27, 2009 22:47 IST
The Rs 15,000-crore sales RPG Group, which has an empire spanning everything from Ceat tyres to the Spencer’s retail chain, says it has effected a big round of cost-cutting to brace the economic slowdown and is now looking ahead to surge again.
Among the belt-tightening measures was a ruthless shutdown of underperforming stores, cutting down on inventories that cost bank finance and speeding up project management to get things done faster. Careful layoffs in the 50,000-employee group are part of the recipe.
“Some of our companies have started doing better than the last quarter of the previous year. Cost cutting measures have yielded results and we are spending wherever there is a need,” said Group Chairman Harsh Goenka told Hindustan Times in an interview.
In the group as a whole, travel and advertisement bills have been checked, and collection of dues stressed. Dealers and customers have less elbow room on credit.
Goenka said non-performing retail stores were subject to “pretty brutal” closures that resulted in 10 to 15 per cent cost savings. As many as 100 out of 400 Spencer’s stores were shut and eventually relocated, while its management layers were reduced and organisational zones cut to six from 10. This saves Rs 10 crore a month, Goenka said.
Tyre maker Ceat has been saving Rs. 10 crore a month on inventories since last month. “Our inventory is sharply down by about Rs 90 crore. Profitability at Ceat has gone up sharply. We have optimized forex and manpower management,” Goenka said.
KEC International, the group company that sets up power transmission systems, is now on an efficiency drive to speed up projects and cut inventories. “We are bring an entire culture of cost control,” Goenka said adding that during the past few months the group had laid off 300 people including 70 managerial staff at Ceat, but has also recruited over 500 people.
“We are still recruiting. During this period (when companies have frozen recruitment) we could manage to get high calibre talent. We are finding it attractive,”