Caparo, the wholly-owned subsidiary of Caparo UK, has finally spelt out its strategy that will revolve around growing its India automotive business through value additions besides diversifying into new sectors to generate additional revenues and de-risk its business. It is also mulling divesting its stake in Caparo Maruti, a joint venture between the euro 1 billion Caparo Group and Maruti Udyog, post the labour unrest at the carmaker.
In the last two years, Caparo’s India operations have turned around from being EBIDTA (earnings before interest, depreciation, tax and amortisation expenses) negative to EBIDTA positive, and the company is now pitching for a positive ‘profit before tax’ status over the next couple of years when it will also look at a public listing. From an EBIDTA minus of Rs 32 crore in 2008, it has swung to closing this year at Rs 150 crore, a swing of Rs 182-Rs 190 crore.
Next year, it is optimistic of achieving Rs 205 crore EBIDTA.
Underlining this achievement has been Group company, Caparo Maruti that has contributed 96 percent of the revenue so far, riding piggyback on the fortunes of Maruti Suzuki. Today, the Caparo Group has grown to eight companies including Caparo Engineering India, Caparo India, Caparo Vehicle Products India, Caparo Power and Caparo Engineering and Construction spread across 26 sites.
Caparo’s initiation in the automotive sector in India began with its JV with Maruti in 1994 with Caparo holding 75 percent stake and Maruti, the balance. Encouraged by the returns, Caparo struck up supplies to other OEs pan-India to grow its ‘body-in-white’ business further.
The stamping unit in Pithampur, Madhya Pradesh, commenced supplies to Eicher Motors with two plants based in the region at present. Other plants at key locales followed including Greater Noida for Honda Siel Cars India that supplies floor assemblies though volumes did not pick up. However, with the recent launch of the Honda Brio, the prospect for volumes is now very real. Caparo’s Halol facility produces dashboard panels, cross members and chassis system parts for General Motors India.
Caparo has also invested Rs 350 crore for Tata Motors at the latter’s various hubs including Jamshedpur, Pune and at Sanand. It has a forging division and aluminium die casting unit at Chennai along with the paint shop, engineering and tool unit supporting it. The design and 3D simulation centre, aluminium foundry for high pressure die casting and tool room are operational since 2007 at Sriperumbudur in Chennai.
The partsmaker kicked off operations in Chopanki (Rajasthan) in 2005 floating Caparo Fasteners India (CFI) for manufacturing high- tensile fasteners with technical support from Caparo Atlas Fastenings, a Group company. CFI has a capacity to produce 26,000 MT of fasteners per annum supplying fasteners to Ashok Leyland, Asia Motor Works, Eicher Motors, Ford, General Motors and their manufacturing locations overseas in the last two years.
In 2006, it acquired Steel Tubes of India with a capacity of 48,600 MT of CDW and ERW tubes for auto and non-auto applications including boilers at Dewas in Madhya Pradesh. The capacity has now been increased to around 100,000 MT annually.
The component maker, which manufactures body-in-white parts like door panels, floor panels, door inner, front members and hood inners, is moving up the value chain to boost margins and bottomline by producing assemblies, chassis and braking systems as well as non-metal systems like aluminium castings, forgings, tubings and toolings .
“We are trying to be more integrative in our approach; for instance, integrating the aluminium castings unit in the UK with the Indian one and acquiring the best technology from the UK facility for it. We have two forging units overseas in Poland and in the UK and are trying to create synergies of a low-cost centre with the forging facility at Chennai. This will help it to perform well globally,” Rajesh Prasad, managing director and CEO of Caparo, India Operations told Autocar Professional.
Caparo has an Indian capex of Rs 50 crore in 2011, Rs 90 crore in 2012 and Rs 100 crore in 2013 for establishing a broad mix of products after undertaking a detailed techno-commercial viability study. In automobiles, Caparo is maintaining a focused approach towards creating capacity and good linkages with global operations.
Prasad says the company has received UK approval for creating capacity for Caparo Maruti at Gurgaon and Bawal as the carmaker introduces new models. Production, however, dipped from 110,000 vehicle sets per month to 90,000 sets in October from Caparo Maruti to the carmaker due to labour issues. It is expected to step up to 95,000 vehicle sets in November after the resolution of the labour problem.
Meanwhile, Caparo plans to add a paint shop and tubing portfolio at Bawal for Caparo Vehicle Products India (CVPIL). A capex of Rs 150 crore over a two-year timeframe has been earmarked for CVPIL with 30,000 square feet having been already constructed.
Caparo has a large land bank and 129 acres is available at Sriperumbudur in Chennai of which 45 acres have been utilised. Caparo Engineering India in Chennai surrendered 50 acres of the 100 acres at Oragadam and is waiting for an additional 50 acres to be allotted by the State government. At Pune where it has two units, 26 acres are unutilised.
At Dewas in Madhya Pradesh, Caparo has 52 acres that can be used for expansion besides surplus land in Jamshedpur. Prasad adds that after building integrated units on available land bank for varied sectors, “Caparo will go for listing in any exchange.” The company’s average investment band ranges from Rs 40 crore to Rs 120 crore in 22 plants across India.
Key supplier to Maruti Suzuki India
Caparo is an integral part of all the new models planned by Maruti Suzuki including the upcoming Ertiga MPV for which robots have been leveraged for producing new assemblies. It will invest Rs 30 crore to enhance capacity at its Gurgaon stamping facility and another Rs 45 crore at Bawal for Caparo Maruti. It will clock Rs 500 crore turnover this year with 90 percent supplies to Maruti and 10 percent for non-auto operations.
The carmaker has indicated to Caparo that it can tap other customers to tide over the recent labour unrest at its Manesar factory. The partsmaker is also scaling up capacity for Volvo Eicher, BorgWarner and Honeywell for turbochargers and is undertaking due diligence and a commercial viability study.
Caparo now plans to strengthen its presence in the two-wheeler segment and OTRs for hedging risk and distributing fixed cost. High-tensile fasteners are to be supplied to Hero MotoCorp and Honda Motorcycle & Scooter India.
Three months ago, the passenger car segment was the driver of automobile growth in the country but now CVs have been faring better with SIAM moderating the passenger vehicle growth in the current fiscal to 2-4 percent from 10-12 percent in July. The CV segment is, however, pegged at a healthy growth of 13-15 percent in FY’12.
Meanwhile, Caparo is among the first to be approached for requests for quotations for skin panels and body-in-white parts for the hatchback and saloon to come from PSA Peugeot Citroen which has announced plans to set up a plant in Gujarat.
Caparo has a large stamping unit at Sanand with pressing capability and a blanking facility. Ford, Piaggio, M&M and Volvo Eicher can be supplied from the existing plant but for catering to new OEs, Caparo has requested the Gujarat government for an additional 150 to 200 acres at select locales in Gujarat. Maruti is also likely to finalise its location in Gujarat – either a site near Rajkot or close to Ahmedabad. Investment in Gujarat by Caparo is envisaged at around Rs 200 crore to be undertaken in a phased manner and funded through a debt:equity ratio of 1.25:1. The Caparo Group is targeting a topline of $1 billion from the automobile sector over the next three to five years in India.
The company also has ambitious export plans of touching a Rs 170 crore revenue next year from the current Rs 90 crore. Supplies are headed to Europe and US for BorgWarner, Mahindra Navistar, Honeywell, Volvo and GM Australia. Caparo also exports to Nissan Spain and Romania besides body-in-white parts for Renault with whom talks are underway for fresh orders. The company’s Jamshedpur plant exports the entire cabin assembly and allied parts for Tata Motors’ World Truck as well.
While Caparo girds up for its India growth story, it is also open to exploring a production base in South East Asia and Middle East, if something exceptional crops up.