1. u 70 u
January 20, 2013
Business India u the maga zine of the cor por ate wor ldCorporate Reports
A
year back, the Kolkata-based
public sector Balmer Lawrie and
Co Limited unveiled plans for
a 50-acre logistics hub at Dankuni at
the eastern junction of the Golden
Quadrilateral National Highway at
the outskirts of Kolkata city. Now, “all
our efforts with the Bengal state gov-
ernment for the land clearances hav-
ing failed, we have abandoned the
project,” says chairman and manag-
ing director Viren Sinha. In contrast,
Andhra Pradesh has breathed fresh
life into the `170 crore Balmer Lawrie
investments in a multi-modal logis-
tics hub in partnership with Visakha-
patnam Port Trust. The hub comprises
road/port/rail-connected container
freight station (cfs), warehouses, cold
chain facilities, as well as a truck park
spread over 50 acres. It will
be open by beginning 2015.
“We expect Union shipping
ministry’s approval shortly,”
says, Sinha.
Visakhapatnam port traffic is
growing 25 per cent year on year, says
Niraj Gupta, director, service busi-
ness. “Kolkata Port Trust has given
us some land for modern warehous-
ing to integrate our operations, but
the scale is not as good as we would
have liked it to be. Kolkata and Hal-
dia port traffic has become less reli-
able over the years, because of silting
in the river and freight growth rates
are not the best in the country,”
Gupta adds.
Balmer Lawrie already has cfs
facilities in Mumbai, Chennai and
Kolkata, handling 180,000
teu (20 ft equivalent unit).
Half of this is in Navi Mum-
bai port, with Chennai and
Kolkata sharing the rest. These
three facilities are under expan-
sion, through an investment of `40
crore. While the facility at Mum-
bai has expanded to 26 acres (from
20 acres), Chennai has gone up to 17
acres (from 10 acres) and Kolkata to
16.5 acres (from 10 acres). The work
is going on in improving all ware-
housing facilities.
Balmer Lawrie also has an inland
logistics unit in Coimbatore and the
growth in the coming years of Chen-
nai is expected to be greater than
Kolkata, the company’s traditional
home base. Balmer Lawrie already
Aiming growth
Balmer Lawrie aims at a
larger slice of the logistics
pie, while planning to spin
off barrel manufacturing
Photos:SajalBose
Sinha at the
barrel unit.
May spin off
the barrel
business

2. u 71 u
January 20, 2013
Business India u the maga zine of the cor por ate wor ld Corporate Reports
has other major business units in
Chennai and this could be impor-
tant for the company’s future.
It also has an ailing subsidiary
Transafe (the plants of which are in
Coimbatore and Kharagpur) with
Balmer Lawrie Van Leer, which man-
ufactures and handles non-standard
containers used on Indian roads. The
company plans to gradually shift to
railway containers, because the coun-
try lacks container handling facili-
ties for truck traffic. Balmer Lawrie’s
clutch of logistics-related businesses
contributes `460 crore to the com-
pany annual turnover.
Balmer Lawrie is also the largest
organised steel barrel manufacturer
in India. It has a strong Chennai-
based jv with Van Leer of Holland
for the manufacture of plastic bar-
rels and steel drum closures. There is
a proposal to spin off the barrel busi-
ness in the next two years, which
the board has been pursuing with
the ministry for some time. This
will unlock the enterprise value of
the business and enable the division
to tap the various opportunities in
industrial packaging – both in steel
and plastic.
The usage of plastic drum is grow-
ing in the country and can offer
integrated packaging solution to
customers. The company is in talks
with the ministry, which may lead to
the inclusion of Van Leer, the world
leader in steel drums, in the projects.
The ministry is likely to form a com-
mittee soon to look into the issue,
but the management is tight lipped
about it at the moment.
Capacity increase
Balmer Lawrie produces up to 4 mil-
lion barrels a year, worth `488 crore,
in its six plants at Mumbai, Chen-
nai, Kolkata, Asoti, Silvassa and Chit-
tor. Their capacities range from 165
litres to 210 litres and they are used
in lubricants, chemicals, paints, bitu-
men and food industries. “We make
the drum thin, flexible or rigid,
depending on the need, and because
of our superior technology, we have
45 per cent of the national market
share,” says Anand Dayal, director,
manufacturing.
The new Navi Mumbai barrel
plant, being set up with an invest-
ment of `100 crore, will increase
capacity by another 30 per cent by
2014. The modern plant will run with
just 20 workers, as against 150 in older
plants. “Western region accounts for
65 per cent of barrels in India,” says
Sinha. “And the company is the major
supplier for the lubricants indus-
try. The multi-locational benefit and
well-accepted quality standards make
Balmer Lawrie a preferred supplier,”
says Satish Gupta, managing direc-
tor, Agarwal Packaging, a Pune-based
barrel manufacturer. The business
demands plants in many locations,
because barrels are voluminous and
cost more to transport.
In April this year, the government
Anand Dayal: thrust on the retail sector
Financials
(` crore)
2012
2011
2010
2009
2008
2012
2011
2010
2009
2008
Income
PBT PAT
1,776
1,751
2,148
2,450
1,571
130
152
153
181
190
101
117
121
138
87
Revenue break-up
2012 (` crore)2012 (` crore)
Others*
66
Chemicals
54
Tours & Travels
928
Logistics
460
Greases &
Lubricants
454
Industrial
packaging
488
*Others includes `2 crore from tea business
Shareholding pattern
Government
62%
Public
24%
Bank & FIs
14%

3. u 72 u
January 20, 2013
Business India u the maga zine of the cor por ate wor ldCorporate Reports
has issued a notification stating that
all barrel procurement by govern-
ment institutions, including psus,
has to be from msmes, in an effort
to boost the sector, which automati-
cally disqualifies Balmer Lawrie from
putting up any more tenders to gov-
ernment-owned oil companies. “We
have successfully broken away from
our dependency on the government
contract line in barrel business,” says
Sinha, reacting to the notification.
“Today, only 20 per cent of our rev-
enue in barrel division comes from
government contracts, as against 80
per cent five years back. So, this move
will not have a major impact on our
revenues. Also, we will strengthen
our marketing efforts to gain more
share in private sector.” Dayal con-
curs. “Quality is a major param-
eter for the oil companies. How
can a small manufacturer control
quality,whichneedsbiginvestment?”
he asks.
Balmer Lawrie’s Balmerol brand of
grease and lubricants has 3 per cent
of national market share and con-
tributes `455 crore to the revenue.
It has four blending plants in Kolk-
ata, Chennai, Mumbai and Silvassa,
which produce 45,000 tonnes of it per
annum. Balmerol is strong in steel,
mining, railways, defence and auto-
mobiles industries, which account
for 70 per cent of its market. There
are moves to ramp up retail and con-
tract supply sectors – especially, the
automotive retail sector which com-
prises 65 per cent of all lubricant use
in the country. Balmerol competes
with market leader Castrol (with 24
per cent), as well as Veedol, Pennzoil
and Shell, besides large oil companies
like Indian Oil, bp and hp.
The company also has changed
the packaging colour and logo of
the brand. There is a wide variation
in grease and the product is decep-
tively simple looking. “Formulating
is a key skill and we have a long-
standing state of the art application
research lab,” says Dayal. Another
20,000 tpa capacity is being added to
the Silvassa plant at an investment
of `35 crore and is expected to start
production any day now. Its 60-year-
old 20,000 tpa Kolkata plant on
Hide Road in the port area, is likely
to be curtailed and moved out to a
fresh location, because of environ-
mental laws and the need for space
to expand. Similarly, the 6,000 tpa
Mumbai plant in the Sewri area will
also be shut down, due to environ-
mental concerns and the production
shifted to nearby Silvassa. The com-
pany plans to sell the land in Sewri.
Balmer Lawrie is a Category i
mini-ratna, with an ‘excellent’ MoU
performance – a rating given by the
government to encourage better per-
formance at public sector units and
give them relative freedom from the
government. It gives the psu some
liberty to make independent invest-
ment decisions – of up to `500 crore,
or equal to company’s net worth,
whichever is less. The MoU is an
agreement made by the company
management with the government
on the annual performance expected
from the company.
Share of burdens
“Most of Balmer Lawrie’s business
units are operating in the matured
market segment, with relatively
lower margins. Despite a consistently
Gupta at a cfs. Logistics is the principal driver of the company’s profit
Balmer Lawrie, a partner-
ship firm, was established
in 1867 by two Scotsmen –
Stephen George Balmer and
Alexander Lawrie – for tea
trading, tea blending, ship-
ping and forwarding. The
four-storied office building,
which is also the present
hq, was built in 1909. And,
in 1924, the partnership was
converted into a private lim-
ited company, only to become
a public limited company
in 1936. Next year (1937),
Balmer Lawrie entered into
the manufacturing arena,
when it set up its first grease
plant at Kolkata.
In 1968, Duncan Broth-
ers acquired the company.
But, in 1969, when managing
agency system was abolished
in the country, Balmer lawrie
lost the managing rights of
over 40 tea gardens. In 1972,
the management divested
their stake in favour of Indo-
Burma Petroleum Com-
pany Ltd (ibp). The company
became a subsidiary of ibp,
when the oil companies were
nationalised in the same year.
And, when ibp merged with
Indian Oil in 2002, the share
of Balmer Lawrie held by ibp
was transferred to Balmer
Lawrie Investments Limited, a
shell company.
Continuing with a diverse
clutch of businesses, and
operating out of its heritage
Genesis and after

4. u 73 u
January 20, 2013
Business India u the maga zine of the cor por ate wor ld Corporate Reports
strong liquidity position and highly
conservative capital structure (nil
debt equity ratio as on 30 Septem-
ber 2012), Balmer Lawrie has not
ventured into any major expansion
or acquisition during the last few
years. The company’s prospect lies in
its ability to identify lucrative busi-
ness segments and diversify through
the organic or inorganic route,” says
Sourav Chatterji, assistant general
manager, care (Credit Analysis &
Research), which has rated Balmer
Lawrie at aa+.
Balmer Lawrie has its share of bur-
dens too. Its oldest tea business has
been running up losses for some time
now and is likely to be phased out in
the next one year. “Balmer Lawrie was
a prominent managing agency in the
country and had major controling
stake on tea estates in Assam . The
company was one of the key mem-
bers of India Tea Association (ita) till
1970’s. As stated in record, the last
ita chairman from Balmer Lawrie
Company was in 1964.” recalls ita
secretary general Monojit Dasgupta.
Gradually since 1980 Balmer Law-
rie tea business started fading as the
focus of the company shifted to other
diverse business activities. At pres-
ent they are non significant in tea,
Dasgupta adds. The tea division has
a small blending plant and its two
brands of packaged tea – Tarang and
Balmer Lawrie, The Tea – do not have
any significant market presence. The
company’s strong travel agency busi-
ness also faces some overwhelm-
ing challenges in a changing online
world. Balmer Lawrie is India’s old-
est iata-accredited travel agency,
with a tally of `928 crore in billing.
However, with internet travel book-
ing and shrinking agency margins,
its profit before tax is just `11 crore.
Also, the unit has been plagued by a
large outstanding of over `80 crore -
mainly from public sector firms and
the government, which forms 95 per
cent of its business.
Balmer Lawrie will need to exam-
ine its options in this business unit
and either re-work the business
model or shift it out. However, the
management believes that the advent
of fdi into the aviation sector is also
likely to see the entry of low-cost car-
riers operating in the country, which
will make air ticket prices cheaper
and competitive. This will increase
traffic flow and business volume.
Cheaper air travel is also expected lift
the restriction on air travel move-
ments by government employees,
which were introduced as part of
austerity measures.
Balmer Lawrie has been at the
receiving end of some government
Sahoo: strategising to trim labour cost
Balmer Lawrie’s Joint venture
Company Stake Operations
Balmer Lawrie 40% Plastic drum
Van Leer containers & steel
drum clousers
Transafe 50% Container leasing,
Services warehousing &
manufacturer of
special purpose
containers
AVI-OIL India 25% Aviation lubricants
Balmer Lawrie 49% Packaging media.
(UAE) LLC Steel & plastic
containers, cans tin etc.
PT-BL Indonesia 50% Grease & lubricant
office building in downtown
bbd Bagh in Kolkata, Balmer
Lawrie kept its bottomline in
the black through the last 144
years. “The company, which
has seen fewer upheavals,
despite being a sundry hold-
ing of the Union ministry for
oil & gas, has kept its bal-
ance sheet in good health,”
says finance director Prabal
Basu. The government holds
62 per cent of Balmer Lawrie,
while 24 per cent is held by
the public and the rest, with
bank and fis.
The company’s annual
sales have touched `2,450
crore, with a net profit of `138
crore. The stock price has
moved from `453 in Decem-
ber 2011 to touch a 52-week
high of `709 in Novem-
ber 2012, on a `10 share.
Currently, the share price is
hovering at `650, keeping
up with the bse Sensex. The
company’s turnover for the
September quarter went up
by 20 per cent to `635 crore,
as against `531 crore during
the corresponding previous
quarter. “The new capac-
ity addition and the market-
ing initiatives will improve
company’s growth,” says
Basu. “We expect to achieve
a turnover of `3,500 crore
by 2015”.
The company’s manage-
ment has been fairly stable,
with only two chairmen in
last five years. S.K. Mukherjee,
who retired one year back, is
believed to have been con-
servative, with the company
hardly going for any expan-
sion during his tenure. u

5. u 74 u
January 20, 2013
Business India u the maga zine of the cor por ate wor ldCorporate Reports
experiments too. Its Chennai-based
leather chemicals division has Cen-
tral Leather Research Institute as its
technical partner. The management
claims it has developed a pioneer-
ing chemical - to replace natural fats
used in leather tanning with syn-
thetic fat liquor, which is cheaper
and more durable.
The division also has a construc-
tion industry chemical plant in Kolk-
ata. Although the company reported
`54 crore in sales in this segment,
it lost almost `2 crore because of a
stiff increase in imported raw mate-
rial price. Another of its failed
ventures is the lpg bottle manufac-
turing plant in Kolkata and Mathura,
which have been shut down, after
the government licences and quota
restrictions on these products were
removed. Since this business is con-
trolled by small-scale sectors which
produce at low cost and under-quote
price to grab orders, the company
could register almost no margins in
recent years. Also, the high cost of
maintaining zero failure rate had
made the business tough to be in for
Balmer Lawrie.
“We somehow have retained the
legacy of managing agency culture,
minus its hierarchical structure,”
says Sinha. “The strength of the com-
pany is its experienced team of peo-
ple and their innovation to perform
in a competitive world.”
Balmer Lawrie has managed its
joint ventures well. Van Leer has
been its partner for two decades
now. The company also has part-
nerships with avi Oil (an ioc ven-
ture) and Nyco of France for aviation
industry lubricants, pt-bl Indonesia
for grease and lubricants, and bl-uae
(with Sheikh Hasher Maktoum of
Dubai) for drums and steel cans. Five
jvs including two oversea ventures
adds an additional `390 crore on the
company’s gross revenue.
Business diversity
Balmer Lawrie was nationalised in the
early 1970s (see box). It was probably
taken over more because of political
pressures than for business reasons. It
was attached to oil minor ibp and left
largely to fend for itself. ibp itself has
now been amalgamated with Indian
Oil and a proposal to sell of Balmer
Lawrie has been long-standing. The
nda government proposed to do so
as part of its privatisation process
in 2003, before some political argu-
ment stopped it. The upa i manifesto
stopped its sale in 2004, under pres-
sure from the Trinamool Congress.
“In 2003, some private sector bid-
ders were looking us up, but the offi-
cers’ association felt this would lead
to asset stripping and took it up with
the ministry. And the move to sell
collapsed,” says Anand.
Balmer Lawrie has been blessed
with the luck of being able to exit
businesses – a rarity for a public sec-
tor company. It has, at various times
since the liberalisation of the Indian
economy, closed down its lpg cyl-
inder plants (Mathura and Kolkata),
grease chemicals manufacturing
(Taloja) and a marine freight con-
tainer manufacturing (Kochi). “Man-
power has been trimmed from 3,400
in 1993-94 to 1,400 today, by offer-
ing vrs, merger of functions and
outsourcing service areas,” says P.P.
Sahoo, director, hrd.
Sahoo started hiring more con-
tractual labour since early 2000
and has not recruited against retire-
ment. In the drum plants in Sil-
vassa and Asoti (Faridabad), the line
is entirely run by contract workers.
Balmer Lawrie’s executive strength
is now 475 – half of what it was in
1994. Due to all this, employee costs
have been brought down to just 5 per
cent of the turnover. Balmer Lawrie
has recently started a new initiative
called bl force (Balmer Lawrie for
Creative Entrepreneurship), where
25 executives under 40 years of age
have been tasked to formulate Balmer
Lawrie vision 2030, says Sahoo.
“It is a public sector company
whose business areas are largely in
the private sector,” says V.L.V.S.S.
Subba Rao, advisor, ifd, ministry for
petroleum and natural gas, who is
also a member of the company’s gov-
erning board. “However, it is able to
compete and maintains its market
share. Because of its business diver-
sity, the company sailed through the
recession. And, in the next five years,
it expects to grow bigger in logistic
operation, including cold chains. To
achieve that, it needs to have a sig-
nificant presence around the major
ports of the country,” Rao adds.
The way Balmer Lawrie is going,
does it make business sense for it
to continue with its headquarters
in Kolkata, since a significant por-
tion of its assets are based in western
and southern India? These units also
bring in a major part of the compa-
ny’s revenues. And, there are enough
local entrepreneurs who would hap-
pily lap up the heritage and real
estate of the company.
u SA J AL B OSE
Basu: balance sheet in good health