Ravi Damodaran, president (Technology & Strategy), Varroc Group, speaks to Amit Panday on the company’s growth strategy for 2020, strengthening technological capabilities and targeting supplies to four-wheeler OEMs.
What is the Varroc Group's growth strategy for 2020?
In 2012 we chartered a strategy for 2020, which broadly consists of two factors — where to play and how to win.
So for each business vertical where to play defined market segments, products, customers and what we will and won’t pursue. That brought more focus to our engineering, marketing and business development efforts.
Our study totalled up to revenues of up to Rs 20,000 crore. Now during the course some assumptions may change, market conditions may fluctuate but we do not realign our targets. We continue to stick to them. This is the difference between a tactical and strategic approach. That’s what we do.
Varroc Lighting Systems is the largest vertical within the Varroc Group. Where do you see VLS in terms of revenues by 2020?
Let’s talk in terms of percentage. VLS contributes about 62 percent of overall revenues for the Varroc Group. Our own analysis of the market data includes different growth rates for each customer.
Secondly, the growth rates for India and international markets are different, and a lot depends upon the exchange rates. We are estimating that the Group turnover will stand at around Rs 8,300 crore by end- of this financial year.
Which is the second largest vertical within the Group?
Polymers is the second largest, followed by the electrical and then metallic verticals within the Varroc Group.
Has the crankshaft business taken off?
As a business, the revenues from crankshafts are not as per our expectations yet. The crankshafts business is capital intensive. Our strategy was to get into the international markets through global players. There are some global players who are sourcing from India, and those are our customers. A few of these major customers have deferred their plans because of global turmoil and other reasons, and that has not helped us.
Therefore, I would say that we are delayed on this front. We are not meeting our expectations from the crankshaft unit for this year. That said, we do not revise our plans and do not react to short-term developments. Strategically, we have other plans that may take some time.
We are talking to one of the largest players in this business and to see how we can rectify the results from the crankshaft business. This could be a strategic move we would like to take to set our crankshaft business right. The organic path that we had taken is not meeting our expectations, and unfortunately we have had delays in finalising our strategy for this vertical.
As regards the polymer and electrical divisions, the company procures bulk orders from two-wheeler OEMs. Are you looking at diversifying into the four-wheeler segments in India?
Yes. Our vision states that we should be number one in two-wheelers (in products we make) and a leading supplier for select products for four-wheelers. Some select products include engine valves and lighting solutions, which we are already supplying. We also supply interior parts under the polymer division. We are looking at future products such as security systems (electrical and electronics) which we estimate will have good demand in the coming times. So we will start with two-wheelers and cater to passenger cars later.
Similarly, I look at the product line of motors and hybrid solutions for two-wheelers, three- and four-wheelers that we think will pick up on demand eventually.
In the context of inorganic growth, is the company looking at options for its polymers, electrical and metallic divisions?
Yes. Under the how-to-win strategy for our 2020 plan, there is a mix of organic and inorganic growth. We have said that we will eventually get into certain products that we don’t have today. While some of them we will be developing organically, some will be through buyouts and partnerships. That, clearly, is our priority.
So has Varroc set upon a concrete option for inorganic growth for the three divisions?
For polymers our outright focus is on India, and we are still looking for a right mix before we finalise something. For the metallic division, we are very close to finalising something within 2016 — It could be a partnership. We would like to share our capabilities for end customers.
What are your priorities for 2016?
My priorities never change. I have three priorities all the time — beefing up our technological capabilities; this requires money, for which I have to find out the sources. Secondly, achieving operational efficiencies across the divisions, and lastly honing up and retaining the talent.