Delux Bearings to supply to carmakers

Leaving home in Mumbai, to be in Las Vegas during Diwali and conducting a pooja there may sound a bit odd. But that’s what Kirti Rathod, chairman and managing director of Delux Bearings, along with his wife will have done this Diwali, mixing business with tradition.

Rathod is going to meet a Tier 1 supplier – a key customer of his company – to discuss expansion of business between them. “We did pooja and put tilak on the president of that company in 2007. We’ll do it again this year,” says Rathod proudly. Perhaps, it's another sign of India’s growing influence in the international arena.

In India, even as the automotive industry is witnessing a slowdown, the Mumbai-based Delux Bearings is working on expanding its portfolio to be able to add more business from passenger vehicle makers. The company will invest Rs 20 crore towards this expansion. “The investment will be made for manufacturing clutch release bearings and special ball bearings for gearboxes in passenger vehicles. We’ll add half-a- million units to the annual production capacity in each of plants in Pune and Gujarat,” Rathod told Autocar Professional. Currently, the Pune plant’s annual production capacity is three million units, while the Gujarat plant can produce 1.8 million bearings annually. The first production line for car clutch release bearings will start trial production in December this year. The investments in the two plants will be made in three tranches.

New business

Even though almost all of Delux Bearings business comes from Tier 1 suppliers to commercial vehicles or commercial vehicle OEMs, it didn’t have Ashok Leyland in its client list all these years. Rathod is happy that he managed to change that last fortnight. Autocar Professional learns that Delux Bearings will supply to the first 613 LCV project of Nissan Leyland joint venture next year. On an annualised basis, business from Ashok Leyland is expected to be Rs 4 crore. “We will start commercial supply to Ashok Leyland from January 2012 and expect to reach the full ramp by 2013-2014,” says Rathod.

Delux Bearings supplies to around 15 OEMs. After Ashok Leyland, Rathod is hoping to bag new business from some tractor manufacturers. Delux Bearings is also in talks with Case New Holland, Escorts and Sonalika.

Plans for product portfolio extension, technology

A bigger plan underway at Delux Bearings is to climb up the value curve in its operations to garner more business from new customers. It plans to enter into manufacturing of transmission sub-assemblies. Currently, it manufactures only bearings that go into various applications. But to be a supplier of transmission sub-assemblies, it will have to strengthen its engineering capabilities. How will it build that capability?

“We are in talks with potential technology partners in Germany, Korea and Italy. We’ll be able to strike a partnership with one of them by June 2013. That will help us get access to a new vertical also,” reveals Rathod.

Even as efforts to strike a technical alliance continue, the team at Delux Bearings is putting indigenous efforts to be more competitive in the business. For example, in the area of lightweighting, Delux Bearings has managed to reduce the weight of a clutch release bearing over the last one year from 1.75kg to 1.30kg, thanks to engineered plastic. The cast iron hub in the bearing has been replaced by plastic.

Technology comes at a price but the benefits sometimes more than make up for it. The cost of the bearing went up by 30 percent and so did its life. Rathod says that OEMs are now offering five years of warranty instead of four years earlier. These bearings go into medium and heavy trucks. Rathod adds that to sustain competitiveness, Delux Bearings brings out multiple products every year. “My gauge is that we have been very persistent in quality, supply, and inputs. For the past three years, we’ve been adding 50 new products which include 30 new clutch release bearings. Clutch bearings being our most important product, we have to bring in new products. We now have 250 clutch bearings both for domestic and export applications,” says Rathod.

Support from exports

Rathod doesn’t want to lose out on any opportunity in the overseas markets as the domestic market is currently witnessing a slowdown in demand. Business from exports contribute a fifth of his company’s revenue, which stood at Rs 85 crore last financial year. “Exports, along with the aftermarket, have helped us to face the current slowdown in the domestic market as these businesses are growing,” says Rathod. “It’s mainly in the heavy trucks segment where we are feeling the pinch,” he admits.

The company supplies to customers in 25 countries. The markets of Germany, Italy, USA, Mexico and Korea together contribute 75 percent to its exports revenue. “We have a long relationship of 10 years or more with many of them. There are bigger opportunities. We have got early signals from two or three of them for newer orders. They have said that they will buy larger quantities of older and newer products also,” says Rathod. Some of the additional exports business has come as a couple of customers have shifted their sourcing base.

Merging businesses

Luxite Industries, which is also promoted by Kirti Rathod, will be merged with Delux Bearings. The objective behind the move is to have a single brand. At present, there are two brands – Deluxe and Luxite. For better prospects in the business, Rathod plans to keep Delux, the stronger brand of the two, after the merger. The merger will also help the company pitch for new businesses under one brand. With all the new plans, Rathod expects his business to cross the Rs 100-crore mark during this financial year. It will be a 29 percent growth, if he achieves his target of posting a turnover of Rs 110 crore during this fiscal.