Uma Precision, a manufacturer and exporter of precision assemblies, systems and machined parts for the automotive and electrical industries, is all set to come out with an initial public offering (IPO) of Rs 91 crore to fund its expansion plans. The company, which achieved a turnover of Rs 76.5 crore in 2006, has chalked out an ambitious five-point plan that involves both forward and backward integration of its capabilities besides setting up a new facility in Pantnagar.
“These plans will ensure that we remain competitive in addressing the growing needs of global OEMs and sourcing offices who are already talking huge volumes, and these are expected to grow in the coming years,” said managing director and CEO, Rajendra Kankaria.The backward integration part of the plan involves setting up a bright bar manufacturing facility in Waluj. Bright bar is the raw material for the company’s product and its in-house consumption is about 750 tonnes a month. This is expected to go up to about 1600 tonnes a month once all expansion plans are in place.
The bright bar facility will have an installed capacity to make 2000 tonnes a month, and Uma plans to sell the excess capacity in the local and export markets. Global demand for bright bars is projected to be 23 million tonnes by 2011, and 75 percent of this is consumed by the automotive industry. The plant will begin production by February 2008. The company’s forward integration plan has two elements: Delta coating technology and cold forged parts using part former machines. Delta coating is an environment-friendly technology which the company plans to use at its Pune and Bangalore facilities. It has a licence from Dorken, Germany to use this technology.
The Pune plant is expected to become operational by September 2007, and the Bangalore plant by February 2008, and the company is reserving its option of staring another plant in north India to cater to the needs of that region. The second element of its forward integration plan involves the setting up of a new facility to manufacture cold forged parts using part former machines. These machines enhance productivity and ensure better finish of the cold forged parts. The plant, to be located in Waluj, is expected to begin production
in July 2008.
Uma is also expanding into CNC and vertical machining centres (VMC). It is setting up 45 new machines in a new facility in Supa, Maharashtra, where it already has a plant. The facility is expected to begin production by the end of the year. Kankaria added that the VMC machines would help Uma diversify into non-auto industries like the aerospace industry as well. This is significant because Boeing has announced a maintenance, repair and overhaul (MRO) facility in Nagpur. Rival manufacturer Airbus Industries is said to be considering a similar facility in Nashik.
#####
Uma’s Supa plant, which is near Ahmednagar, will be ideally located to explore the potential demand from both facilities. “The investment in the advanced CNC and VMC machines has implications beyond the automotive industry. The parts produced by these machines can be used in the aerospace, biotechnology, health and agriculture equipments. We will explore the demand from these industries as well,” he said.
Five years ago, Uma Precision was derived all its revenue from the automotive company. In 2003, it strategically diversified into the electrical components. Today, this business generates Rs 14.5 crore in revenue, and accounts for about 20 percent of its business. The company exports about 400 parts to Lucy Switchgear in Dubai, and Multitech in the US. The final part of the expansion plan involves the setting up of a new facility in Pantnagar. This would cater to the needs of Tata Motors’ Ace and the Bajaj Platina. Uma Precision currently operates seven plants in five locations across India.
Kankaria reckoned that although his company was the one of the largest with 300 single spindle and 45 multi spindle machines, he needed to expand to scale up operations. “We may be the largest, but we have to scale up quickly if we have to cater to the needs of the new generation of products and technologies,” he said. Uma Precision was formed in 1979 in Pune as a supplier to Kinetic Engineering. It subsequently added Bajaj Auto and Tata Motors to its list of clients. The first expansion came in the year 1983 when it set up a second plant in Ahmednagar to cater to the needs of Kinetic Engineering.
In 1989, it set up a plant in Waluj to cater to Bajaj. March 1995 saw the takeover of the till then partnership concern Uma Precision Industries by Uma Precision Private Limited. This ignited an expansion spree which began a new unit in Chinchwad, near Pune. In 2000, it expanded capacity at Supa, in Ahmednagar. And in 2002, it set up a plant at Hosur, Tamil Nadu. It has incorporated a subsidiary in Australia for marketing of its products in that country. At present, Bajaj accounts for nearly 60 percent of revenue and Tata Motors nine percent. The company is single-source supplier for about 400 parts to Bajaj and 68 to Tata Motors. In all, it produces more than 850 components for the domestic and 400 parts for the export market.