Taco’s new business thrust

The Taco Group is exiting JVs where it doesn't see a critical business volume of Rs 500 crore and above.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 30 Jun 2010 Views icon4672 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Taco’s new business thrust
Tata AutoComp Systems or Taco is exploring new product segments as it strives to grow its turnover from a projected Rs 4,200 crore in 2010-11 to Rs 12,500 crore in four years. The Group’s target is to add at least Rs 3,000 crore in business with castings and forgings, alloy wheels, airbags, sensors, and combination switches, some of these from the extensive portfolios of its current JV partners.

R S Thakur, executive director and CEO, says that he wants to leverage technologies and spare capacities within Group companies to enter non-automotive product lines such as plastic furniture and sheet and bulk moulded composites for electrical switches and white goods. He expects them to contribute around 20 percent of overall business by then.

Meanwhile, the Taco Group has almost completely emerged from a slimming-down exercise, having exited seven of its JVs over the last year and a half. It plans to pull out “one or two” more in the first half of July, Thakur adds. He explains that the exit was because these JVs did not meet the company’s set criteria of each JV having to earn over Rs 500 crore and to be in the top three in its line of business. These, along with another target of being Economic Value Added positive in three years, will be the three key criteria for the Group’s businesses going forward.

The company is spending Rs 300 crore this year on capacity addition in its existing businesses, and is pursuing an aggressive technology absorption agenda by setting up engineering centres at companies that do not already have them. “We want to have tech centres in all Group companies for all our products,” Thakur says. This will enable the Group to offer its customers in India cutting-edge technology development capabilities locally, whereas much of this activity has so far taken place at its technology licensors or JV partners overseas. Taco currently operates engineering centres for seating and HCV suspensions as part of its joint ventures with Johnson Controls and Hendrickson respectively, and plans to add another immediately for wiring harnesses under the aegis of Tata Yazaki Autocomp. The technology centres under Tata Visteon and Tata Faurecia have been sold to those partners, Thakur says.

Sustaining growth at 35 percent compounded annually, “50 percent higher than the industry average,” will require skilled employees that stay with the company, not leave after two or three years, which Thakur says was overwhelmingly the case with lateral hiring. Thakur wants to focus on some new areas of business that include emission and safety. In FY 10, Taco’s aggregate margin was 4.5 percent, which is more than many of its global peers. But the higher cost of capital in Taco’s case will reduce the profitability gap.

Taco’s fortune is also linked to Tata Motors, which contributes an estimated two-thirds of its business. Currently, 26 percent is owned by Tata Motors; it wants to reduce its dependence on Tata and increase business from non-Tata OEMs to 50 percent of its total revenue. Taco also plans to set up technology centre in each of its Group companies. To fuel them, it plans to tap India's young talent pool. Thakur was surprised to discover that only 300 of the 10,000 employees in Taco had worked in the company for 10 years or more. That’s why he has stopped lateral recruitment. Over the last six months, he has recruited over 600 graduates, management students and engineers. Taco began “recruiting” freshers who have passed Std XII into a three-year dual-system university diploma programme for which it has tied up with three technical institutes in Pune. The company has enrolled 2,100 students so far and wants to double this number as it takes the programme to Sanand (where it plans to set up units to cater to the Nano) and Bangalore, where its newest plants are going operational.

With all these initiatives, Taco hopes to enter the next fiscal as a billion-dollar company.
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