‘In the next 5-10 years, Gujarat should be amongst the best auto hubs in India.’

Romesh Kaul, Mahindra Gears & Transmissions’ MD speaks to Shobha Mathur about driving gains in Gujarat.

Can you elaborate on the company’s roadmap for acquiring new business and products?
Since 2006, we have added new customers and products but in the past year or so we have added more value-added products and new processes. We have added a new heat treatment facility, and now are going to move from gears to aggregates. We also want to develop our engineering capabilities for creating value-added assemblies and aggregates at both Rajkot and Pune.
In terms of new customers, the Rajkot plant has taken the lead from being a zero percent export company to being 45 percent export-based. We have customers in the US, UK and Turkey, both in tractors and earthmoving equipment.
Then there is our machining capability in Rajkot which is for making bigger gears and shafts. We have upgraded our infrastructure accordingly and capex will be directed to specific customer requirements. The capex for 2014-15 is around Rs 16 crore to be shared between Rajkot and Pune for equipment refurbishing and rebuilding.

How is the new facility at Pune shaping up?
Operations started before March 31, 2014 but it has only 50 percent of the operations at Rajkot. We have so far shifted only about half of the products from the rented facility to the new plant.

With the CIE alliance to be finalised soon, how will it be leveraged to expand overseas?
It will help build up the customer footprint. Mahindra Systech and CIE are complementary to each other in terms of volumes, products, scale, geographies and domain. CIE operates in high volumes while Systech has small and medium volumes. In automotive, we are more in tractors and off-highway applications, they are more in Europe and US in cars, except in gears.

How will the CIE alliance benefit Mahindra Gears?
CIE has forgings, castings, sheet metal products. CIE is into very high-end precision machinings like brake system parts and hydraulic part machinings. The CIE relationship lets Mahindra Gears expand its footprint in precision machining because gears are capital intensive. Several automotive companies in Europe and US are coming to India, so the CIE relationship becomes a potential for catering to those players through Mahindra Gears in precision machining.

Are you also targeting the growing automotive markets of the ASEAN for exports?
In gears, we are targeting South America as our existing customers have operations there. I see a lot of car manufacturing and indigenisation taking place in India and that will offer a good opportunity for exports to grow to Europe which faces tremendous cost pressures.

Gujarat is fast turning into an automotive hub. How do you plan to leverage the port facilities for expanding exports?
After the initial hiccups in the Tata Nano project, Gujarat is emerging as an auto hub. We are essentially a Tier 1 and Tier 2 supplier, so if there are exports, we will supply to OEMs outside or if it is Gujarat we will supply to OEMs who are setting up base in the state. There are a few Tier 1 players coming up here and we will supply to them as well. Many of these OEMs have long-standing relationships with transmission buying companies like ZF and we will supply to these.
OEMs don’t want to buy gears any more but full transmissions; at the same time, gear sourcing is done by Tier 1s so we think more Tier 1s will come to Gujarat. Therefore, we do see potential on the supply side in Gujarat.

What has been your experience of working in Gujarat?
When we acquired the company, the entire staff comprised temporary workers; now 80 percent are permanent. While the Pune cluster has its strength, outsourcing of work has made the situation saturated. Costs are increasing as well. So we have benefits at Rajkot. In Delhi-NCR there have been labour issues. Gujarat has not yet reached critical mass but in the next 5-10 years should be amongst the best auto hubs in India.