'We expect to cross Rs 8,000 crore by March 2015.'

Tarang Jain, managing director, Varroc Group, speaks to Amit Panday on driving aggressive growth, new investments and developing a well-laid out structure to support growth globally.

What do you estimate will be the Group's turnover for 2014-15 and what plans are there in the pipeline to fuel growth in 2015-16 and beyond?
We expect to cross Rs 8,000 crore as a Group. We are planning to support our customers in new geographies such as Russia and Brazil in the coming years, besides expanding our footprint in China.

On the domestic front, we will be adding a manufacturing plant in Gujarat in 2015 while our new plants in Chennai go operational late this year.

Can you provide some details on the Gujarat plant?
Our upcoming plant in Gujarat will be under the polymer division. It The land area allotted is eight acres at Karsanpura. The plant commissioning will be completed by 25 percent in its initial phase, and the rest will be used for future expansion.

The products that will be manufactured from this facility will be plastic body parts for two-wheelers. The plant will employ close to 100 skilled workers and we are planning to commence operations in 2016. We are targeting an annual business of Rs 30 crore from this facility to begin with and it will be scaled up gradually.

Are you adding new units in India? What level of investment is lined up for these developments in the near future?
Yes, we have invested in a moulding unit in Rajasthan and a polymer product manufacturing plant in Chennai, both of which will be operational this year. The focus is increasing on improving efficiencies in operations which will result in better utilisation of our existing sites, resulting in a possible realigning of our footprints.

We are also planning to invest in Gujarat to support our growing customers this year. We are also investing in setting up an advanced engineering centre in Pune this year to focus on next-generation technology development.

Can you reveal the break-up of the expected turnover for FY2014-15 across various divisions in the Varroc Group?
Roughly 60 percent of our revenues come from our international businesses, which are primarily our passenger car exterior lighting division besides small contributions from two-wheeler lighting, and forging in Europe.

Exports form about 5 percent of our domestic operations and aftermarket constitute less than two percent of our turnover as most of our focus in the domestic operations is on the two-wheeler OE business.

How much has the Varroc Group invested in each of its divisions in India?
Varroc is investing around Rs 400 crore annually to support our double-digit growth every year. Roughly half of this is in India to expand capacities and support our growth in the two-wheeler business. The international investments are to enter new markets and develop technologies.

How is the crankshaft business faring and has the company started supplies?The crankshaft supplies have started in end-2013 and are lower than our plan due to lower pull from our customers in 2014. However, we continue to pursue new contracts.

The long lead time for validation in these products will mean a longer gestation time before we hit peak volumes sometime in late 2015. The commercial vehicle market did not do well in the last few years and is just picking up. This should also boost our revenues in 2015.

From the acquisitions that Varroc has made, what are the new practices and work ethics that Varroc has learnt and has implemented in its domestic units? How has that helped?
The lessons learned from our acquisitions have been varied. From our Italian forging operations, we have been benchmarking operational matrices, resulting in initiatives to lean out our domestic operations by more automation and better maintenance practices.

The technology capability in Triom, which we acquired in 2011, has been utilised in offering advanced LED headlamp technologies in our domestic two-wheeler lighting business.

Current initiatives in better management review systems and IT enabling of business processes are inspired from the international practices of our global lighting business.

Overall, the knowledge base has widened and we are able to pull on expert resources from within during our journey of excellence in manufacturing and engineering.

Varroc has been planning to go public for some time now. Can you throw some light on the developments on this front?Varroc has not started planning for going public yet. Tata Capital has invested in Varroc, bringing in strengths on governance and their large global network for us to leverage in growing profitably in the near future. Tata Capital has invested with an intended time line of 5 to 6 years for their exit, preferably through the IPO route.

On the global front, what are the plans to support growth across geographies in near and medium term?
Varroc is committed to support its global customers’ growth in all regions. We are looking at growing in the Russian and Brazilian markets and expanding to more manufacturing regions in China in the near term. In the longer term, the South East Asian and South American markets are of great interest for our two-wheeler business.

One of the biggest advantages of the acquisitions is the expansion of our customer base and the revenue potential it brings for our diverse range of products. For example, we are looking into selling engine valves to international customers who are now accessible to us because of the VLS acquisition.

What are your immediate priorities for all your divisions going forward?
Varroc’s domestic business has begun to focus on investments in technology and in the near term you will see more investments to develop next-generation technologies for the Indian two-wheeler market, which traditionally has been the domain of OEMs. The domestic business is also investing heavily to improve productivity and improve quality.

The international divisions have attained a level of stability despite turbulence in the markets, to allow us to pursue growth in emerging markets such as Russia and Brazil while continuing to expand our operations in China.

We have restructured ourselves to be nimble in funding the cash requirements in each global region and tap more synergies between the divisions.