Sandeep Balooja - The Anand Group president (Business Development)

The current slowdown has led to sluggish growth in the automotive sector. How do you visualise the future roadmap for the Anand Group?
In calendar year 2012, the Anand Group clocked a turnover of around Rs 5,800 crore and is now targeting a topline of Rs 10,000 crore by 2016, which should not be an issue as far as the Group is concerned. In CY 2013, we will close at a turnover of around Rs 6,150 crore through sales of new products for new programmes of existing vehicle manufacturers like electric power steering, plastic intake manifolds, seatbelts, cylinder head covers, airbags and brakes. We have been able to increase our presence with customers by adding these product lines to their product portfolio; for instance, Tata Motors, Maruti Suzuki and Mahindra & Mahindra. We have added products like intercoolers, axles and driveshafts for Maruti. We already supply shock absorbers, filtration products and synchroniser rings to them. We have won an order for supply of electric power steering to Mahindra & Mahindra as well for its new SUV as well as for airbags, steering wheels and seatbelts for Tata Motors, and steering wheels for Ashok Leyland and Daimler. The market is flat but some of our products are supplied for small commercial vehicles (SCVs) and they are doing alright.
How severely has the Group been impacted by the slowdown?
We have been impacted as have some of our product lines. We should have grown at a much higher rate than the current 6 percent this year. For the next year, we are formulating a growth plan taking into consideration the SOPs of new projects. If you look at Mando, Hyundai which was its major customer had not projected any growth and is not even investing. So we have expanded the customers for brakes and EPS to include Nissan, Tata and Mahindra and now have won a sizeable business order with Nissan.
How big is the order size for new projects?
The business won is to the tune of Rs 2,000 crore for a period ranging between 2013-16. In addition, businesses that we are currently discussing account for another Rs 1,500-2,000 crore. Last year, the reason our turnover went up was because we merged two joint venture companies partnered by the two groups – Anand and Korean company Mando. These were Mando India and Mando Steering Systems India. The new company formed was Mando Automotive India with a combined turnover of over Rs 1,200 crore. The EPS business generated a turnover of Rs 600 crore and Anand invested in it prior to the merger.Both the electric steering and brakes businesses were merged to bring synergy into the company to serve as a single-point source for key chassis components for customers of the two companies. The new company supplies brakes, suspension and steering systems. The merger will also enhance operational efficiencies while strengthening the overall organisational and financial structure.Anand has now taken a 29 percent stake in the merged company so that there is a common entity for manufacturing resources and management.
With new orders under your belt, will the Group look at sizeable investments in enhancing capacities?
We are looking at an investment of Rs 1,200 crore over the next 5-6 years in some companies – especially in Spicer and in Mando – to tap new customers and to expand capacity that we had earlier set up only for certain customers. In Spicer, we have won business with Mahindra & Mahindra and are negotiating for orders from Maruti Suzuki.
How will the investments be funded?
Investments will be for different companies, so some of them will be funded by their own general reserves, some through equity and partly through borrowings. No new plants will be coming up and all capacity expansions will be undertaken within existing plants.
With a bevy of OEMs embarking on expansion in Gujarat, is the Anand Group also looking at the state for future growth?
We already have two assembly facilities of Gabriel and Behr at Sanand for Tata Motors and currently will stick to that.
With the severe rupee depreciation, component makers have been cashing in on exports. How is the Anand Group taking this forward?
One initiative is on the hospitality side through Sujan Luxury Hospitality and we are increasing this business both in India and overseas. We are also looking at different exports to our JV partners in auto components and currently about 90 percent goes back to them. Because of favourable currency fluctuations, we will be stepping up exports to our JV partners over the next 4 years. We are already exporting driveline components, primarily to the US and Europe. We are open to setting up new assembly plants overseas but we already have our JV partners overseas. Our strategy is to 'make in India and export out' especially now because of the favourable dollar.Our strategy has always been to have joint ventures for technologies so that we can supply products to our customers at a competitive price due to the manufacturing benefit of a low-cost base in India and also leverage that for exporting to our collaborators. Our direct exports are about 8 percent of the turnover and while domestic sales are also growing because of new businesses. The idea is to grow exports tremendously, over the next 4-5 years, up to 10 percent. Exports will contribute around Rs 800 crore out of the total turnover of Rs 10,000 crore that we are targeting. We are already exporting to Australia, Singapore and Iran and are now looking at Russia as there is a large market there. Now our exports will be based on the understanding with our collaborators or by virtue of the new developments or by looking at the competitive advantage. We are also looking at Africa, though one needs to be careful in terms of clearances and all that but it will be a very big market. Overall, we are looking at Russia, Iran and Africa as new markets for exports to OEMs, both directly and through the 30 International Purchasing Offices of OEMs in India. In Russia, we are targeting the aftermarket for shock absorbers, gaskets and piston rings and recently attended the Automechanika held there. Business is currently under discussion. We were once the largest suppliers to USSR; now we have to get back into the Russian market but are currently not supplying anything. An ACMA delegation, of which I was a part, also went there recently. We are looking at Avtovaz, the local manufacturer, as well as Renault that has a pretty large market share in Russia. Anand is looking at Avtovaz as a Tier 2 supplier to supply one of its product lines. To make a big difference in Russia, one has to get into that area. South Africa is also a big market and many of our collaborators are already there and our focus is to cater to our collaborators. This year we will be clocking exports close to Rs 490-500 crore with 90 percent of going to partners who in turn sell to OEMs or to the aftermarket.
Going forward, which of the Anand Group companies will be seeing maximum growth?
I think Spicer, Mando, Behr, Gabriel and Mahle because of the new products that they have added. For example, in Behr we started with the HVAC but now we do the complete engine cooling. New businesses that we have won are primarily because of them and if you look at the biggest growth it will be from Gabriel, Spicer and Mando. Our primary focus for growth will be passenger cars, SCVs and SUVs.
How do you see the growth potential in Delhi-NCR and do you think it faces a threat of being overshadowed by Gujarat as an auto hub?
I think so. For example, if you look at the incentives, infrastructure and facilities in Gujarat, for example power and the speed with which the government moves, they are fantastic. In comparison, labour trouble keeps recurring in the NCR, so eventually Gujarat will become a fairly big auto hub. Also, I don’t foresee too much of investments coming into the NCR any more.
But some of the OEMs have been facing land acquisition problems in Gujarat?
Land acquisition issues in Gujarat are unlike what Tata Motors faced in Singrur in West Bengal. I don’t foresee too much of a problem there as the Gujarat government is fairly well poised to overcome any challenges related to land acquisition. Automotives and power investments are huge in Gujarat and foreign direct investors are also coming to the state which in turn is able to attract a lot of industries. However, availability of workers could become an issue if everyone comes into the state and the state government will have to look at skilling manpower. But if the manufacturing sector in the country has to grow, training institutes have to come up. The Anand Group has diploma engineers, so we don’t face an issue on that score.