Sandhar Technologies inks tech collaboration with Korean company; to transform into JV in 18 months

Gurgaon, February 25, 2013: To cash in on the growing potential of electronics in the Indian automotive market, Gurgaon-based Sandhar Technologies is upscaling its capabilities in this core area. The company has entered into a technical collaboration with Jinyoung Electro-Mechanics Company Ltd (JEM Techno) of South Korea for manufacturing automotive relays for the Indian market.

The technical collaboration is slated to be converted into a joint venture within 18 months once the relay business picks up steam, with the product basket being expanded to encompass electric switches among other products.

JEM Techno specialises in automotive relays, switches, multi-functional switches, latches and buzzers with an R&D centre in South Korea and three plants in China.

Jayant Davar, founder, vice-chairman and managing director of Sandhar Technologies, told Autocar Professional that its relay business will primarily bridge the technology gap existing in India in this product line. JEM, being the world leader in this area, was an obvious choice for a partnership though it took a long time to woo the Korean supplier.

On the export front, Sandhar’s overseas companies including its facilities in Barcelona, Germany, Poland and Mexico will garner the foreign exchange for the company.

JEM Techno brings to the table its technical expertise while Sandhar contributes its customer relationships and manufacturing base. While its Korean partner is a Tier 2 supplier of electrical parts for complete electronic systems, Sandhar will function as a Tier 1, as relays are plugged directly into motorcycles. Doo-Yung Kim, representative director and president, JEM Techno, says that with India being a growing market, the company visualises a long-term plan for itself in India starting initially with a technical collaboration. Later, it will enter into other electrical component tie-ups with Sandhar.

In China, JEM Techno has been catering mainly to key Japanese OEMs in the passenger car market since a decade. It has technical tie-ups with Niles, Panasonic and Miyamoto of Japan for switches, PCB relays and horn relays.

“Our company’s general practice is to first provide technology, then after seeing its progress, invest money in a new market,” adds Kim. “India is the second largest growing economy, a very large automotive market with a number of well-established Korean companies. Sandhar will provide the required infrastructure and support for bringing in JEM technology and products to India.”

In addition, Sandhar is gearing upto further strengthen its position in the electronics segment by signing another joint venture with an overseas Tier 1 player in early March for another electronic product as well as for future technologies. An acquisition will follow suit, also next month, of an Indian component maker in a different product line.

For Sandhar, future technologies will play a significant role going forward with 60 percent business contributed by automotives, 20 percent by aerospace and 20 percent by other accessories.

Davar says that Sandhar has already revealed its vision 2020 of diversifying into the aerospace sector where electronics will be an important product in terms of both forward and backward linkages.

In automotive, two-wheelers will be one of the largest consumers of relay volumes, with each motorcycle typically using 2-4 relays and constituting a large market for the product. Sandhar plans to initially start production of a million units every month and ramp up to 5-6 million per month in due course of time.

The component maker will kick off production of power relays and relay starters within six months on automatic production lines at its existing Gurgaon facility. Once the JV is etched with JEM Techno for switches and other products, a new facility will go on stream, for which a location is still to be finalised.

The long-term strategy is to generate a turnover of Rs 500 crore from each product line though initially relays are expected to generate a business of around Rs 50 crore per annum.

Once the new facility is set up, the electronics business is expected to rake in revenues of around Rs 100 crore before further ramp-ups.

Sandhar currently has 27 plants and the new manufacturing facility is likely to be established where major customers are located. The initial project cost for relays is around Rs 25 crore and the new facility would entail another Rs 100 crore investment to be funded mostly from internal accruals.

In India, Sandhar’s electronics business is set to cater to the requirements of all OEM segments covering two-wheelers, cars and tractors. The $ 300 million Sandhar manufactures lock kits, mirrors, handles, latches, operator cabins, steel wheel rims and assemblies as well as other products for most of the major OEMs in the country.

SHOBHA MATHUR