SME Focus

BYS

How does a privatization fail or succeed? Perhaps the case of Balaju Yantra Shala (P) Ltd. (BYS), a pioneer in the world in micro hydel turbines, gives some clues.

Set up by the Swiss Association for Technical Assistance (SATA) in 1960 to help in the installation and maintenance of the first dairy plant in Nepal that was established under a Swiss assistance, BYS was being managed by the Swiss until 2045 B.S. (i.e. some 15 years ago) with Nepal Industrial Development Corporation (NIDC) and some small investors as the other shareholders. Then in 2045 BS, the Swiss decided to sell off their majority shares in the company (now Helvetas Nepal, the nominee of SATA holds 4% equity in it) to the employees of the same company. Though it was doing alright for some time, since 2054 BS it started to experience a gradual decline in business. The situation became the worst by 2000 AD. Then the present management stepped in taking some 65% of the equity.

As Rajesh Mani Ghimire, the present MD of BYS recalls, the company was almost bankrupt when he and his team took its reins in their hands. The salary of the employees was overdue for over four months and the electricity connection to the workshop was cut off.

Compare that with the nearly Rs. 40 million cash and bank balance the company had in 1998-99. But in the year 2000-01, the accumulated loss was Rs. 17 million. "The company was not getting any new jobs, therefore it was executing only the old ones", recalls Ghimire.

However, now after about three years of taking the management of the company in their hands, the new management people say, not only has the downslide been arrested, the company managed to climb back to the black region recording a net profit after tax of Rs. 430,000 for the year ended on mid-July 2003.

What did the new management do to achieve that?

The major challenge was the workers' mentality. "They had a typical government employee mentality. They would not finish the job in time", recalls Ghimire and says, to address that problem the new management spent considerable efforts in training the workers. This helped to address the worker problem and they did not have to retrench the old workers.

Second, there was no information system. "People did not communicate properly," as Ghimire put it. So they introduced computerization. Till then the company had a 486 on the name of a computer which was brought there by the Swiss in 1984. Though it was state-of-the-art machine then, it was never upgraded.

Then the other problem was that there was no proper costing system. Now they have a system under which every department supervisor files an estimated cost in terms of machine hours and labour hours needed for the completion of the job before starting the job.

Next, the decision making system was highly centralized. "Even gate passes were needed to be signed by the MD. We streamlined the middle level management and started giving them more authority," adds Ghimire.

Then they hired a production manager and divided the management work among the major shareholders who also worked as executives (Chairman Mahendra Bahadur Karki and representatives of NIDC and Helvetas Nepal do not involve in day-to-day work). As the major shareholders were technologists (Karki a Civil Engineer and Ghimire an Electrical/Electronics Engineer) they recruited Vaskar Yakthumba (an MBA from Australia and who also worked with Standard Chartered Bank) giving him the responsibility of financial management.

In marketing the company had an image of being expensive and late in completing the job though delivering best quality service. The new management changed that by putting people on overtime though it added the cost. Now that image of late delivery has changed a lot and the company is trying to reduce also the costs.

And they also introduced some new products, the major example being the clothesline.

Then, were these only the main reasons for the company's bad days during the earlier management?

There was nothing wrong in the technology or infrastructure. Also the human resource was very good and the people in the top management were competent, according to the assessment of Karki and Ghimire. The principlal reason, therefore, as they identify, was the lack of understanding and cooperation among the senior management people. As a result people in senior management started giving less time to the company.

What does the new management plan for the future?

Focus on the micro hydel turbines, says Ghimire. Though the steel construction business will continue, it will get less focus. "We would like to continue with steel construction just to serve the old customers because they have tremendous faith on BYS. This is a very valuable asset and we do not want lose it. Though it does not yield us profit financially, it provides tremendous marketing benefit."

As present the share of steel construction in the total revenue is about 85% and that of micro hydel only 10%, the company has budgeted to raise the share of the micro hydel to 40%. "This is because the competition in steel construction is growing while in micro hydel BYS is still the specialist." And the company has already proved itself as a specialist in this field in the international level. "So we can target international market," hopes Ghimire. The cross flow turbines that BYS started producing in 1973 have been installed in Malaysia, Laos, Indonesia and India, among others.

Proposal for more sales to India and Botswana are in the pipeline.

However, the company is lately facing some competition also in micro hydel from peltric set technology. Moreover, the existing security situation has reduced the micro hydel business due to difficulty to access the prospective sites. "Even the contracts on hand are not being implemented," laments Ghimire.

Similar problem is there also for the suspension bridge business, another area in which BYS has the age-old speciality.

Therefore, the company now has to continue with the steel structures and search for new areas. In this connection, the company has recently made operational the Aluminum Division and has started producing aluminum doors, windows, cubicles etc.

And the company is about to start body-building for vehicles (there already were 10 chassis lying in the premises waiting to have new bodies). Then there is the plan for powder coating plant that would replace spray coating of paint on the goods produced.

In another strategy, BYS has introduced two types of quality standards to address the market preferences: "BYS quality" is better but comparatively expensive while the "commercial quality" means cutting the corners, though it is preferred by to the price conscious customers.

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