The 19-company, multi-product and well-diversified Rs 10,200 crore automotive component supplier takes a cautious approach in conserving cash in the midst of the industry slowdown but could be spending in a new inorganic move or two.
A few years ago, the Anand Group set up an Automotive Growth Council within the group with the objective of studying the global automotive landscape and trends to identify opportunities for the automotive supplier to grow in an increasingly disruptive era. The growth opportunities could be through ventures with existing partners or outside of them. The Anand Group has 19 companies. "Our automotive growth council has been working on it for the past three years and the first thing that we have done is we are much more knowledgeable about what is happening, what are the new ecosystems that will be developed, what are the new opportunities that are going to be there," Deepak Chopra, Group CEO, Anand Group tells Autocar Professional.
Electric mobility as a driver of new business
Among the areas where Anand Group sees new opportunities, electric mobility tops the list. Lightweighting, composite materials to be specific, is another opportunity area for the industry player. 'Power of partnership' is a philosophy at the Group which has 16 joint. And it is this approach that Chopra feels would come handy to tap some new opportunities also."The advantage for us is that some of our foreign partners are already pursuing opportunities in the EV field. We are very much in touch with them, and we are also looking at those opportunities," says Chopra. Some of those opportunities are "very close to fruition", and that may give rise to either news opportunities in the Group's existing joint ventures or may lead in the formation of a new JV or two.
"Nobody can ignore it", says Chopra about electric mobility while adding that the pace of its evolution, however, can be debated. "I believe the evolution would be slower than what the government wants us to chase," he says. With industry efforts on in advancing internal combustion engine technologies, Chopra believes the conventional business "still has a long way to go". With a large exposure in the conventional industry, the Anand Group is well placed businesswise for now. Any major disruptive development is what could rock its boat.
Exploring the inorganic route to speedier growth, doubling turnover
The Anand Group has grown mainly through greenfield ventures, but now it's exploring opportunities for an acquisition or two. Chopra was speaking after attending ACMA's annual conference in early September, where Mahindra & Mahindra's managing director Dr Pawan Goenka also suggested that a slowdown period may also be a good time to look for inorganic growth steps. A major goal of the Anand Group's next five-year plan is to double its turnover to Rs 20,000 crore. About 10 percent of it could come from the inorganic route. While the organic to inorganic growth ratio may remain the same, the goalpost could get shifted by a year or so due to the downturn in the industry. Chopra expects the impact of the industry downturn to last till the next financial year. The growth may "start coming back only by the next festive season," he cautions. If that happens, most of the Anand Group companies may have a challenging year since they follow the calendar year system for financials as well.
Like many other industry players Anand Group has also been forced to downgrade its annual capex plans. Usually, the Group invests between Rs 750 crore to Rs 800 crore per annum. That figure will come down by Rs 200 crore this year, according to Chopra. However, investments on programmes like BS VI and safety components businesses continue as they also help bag new customers. "In terms of strategic investments for growth which will happen in the future or even in our R&D investments, we have not put a stop on that," says Chopra.
The Anand Group is in the process of setting up a new R&D centre and also some core R&D investments in a few companies in the Group. That includes on for its flagship company, Gabriel India. Chopra says, "Wherever it was possible to conserve, we have been able to do so. That impact would be close to Rs 100 crore of investment, which we can postpone."
As India Auto Inc's challenging period continues, Chopra and his team would look at striking the optimum balance between cost savings and investments perhaps like never before, because as he says, "What has happened is really unprecedented."
The company's plan was to grow by 10 percent this year. It will now be satisfied to end the year with just a marginal growth, or even no growth.
(This article was first featured in the November 1, 2019 issue of Autocar Professional)