Avtec readies third plant in Chennai

Avtec, which was created by spinning off Hindustan Motors’ powertrain businesses in Indore and Hosur, will now set up a third plant in Chennai. Chief executive officer, Sudhir Rao told Autocar Professional that this would be a 100 percent export-oriented unit that will located in the suburb of Tambaram. “In terms of capacity, it will be 200 transmissions annually. Only assemblies will take place here while machined components will remain with the other two factories,” he said.

Avtec posted a turnover of Rs 500 crore last fiscal and is targeting 25 percent growth this year. A little over one lakh transmissions and engines were produced. Its shareholders comprise HM (49 percent), CK Birla and associates (21 percent) and investment firm, Actis with 30 percent. Avtec’s Indore facility makes engines and components for the transmissions like gears, shafts, housing etc. The clients include General Motors India (Tavera), Ford India (all parts of the transmission for Ford cars except the Endeavour as well as all the petrol engines), HM and M&M (transmission part for the Bolero).

Hosur, on the other hand, caters to transmissions for construction moving equipment manufacturers like BEML (Bharat Earthmovers) and Caterpillar. Avtec also makes CNG engines that are exported to FG Wilson in the UK, dealing in generator set applications. It also exports components to Allison Transmission of the US and entire engines to the UK. Plans are on to include Turkey and the UK this calendar while it will sign up with another US-based company for export of components.

“As part of our back-office integration, we are looking at our manufacturing strategy bottom up (what is the right level or scale to operate at), especially on the machining side. We are vertically integrated upto the machining stage. We do not have any in-house castings and forgings but are very good at machining,” said Rao. Avtec is also open to the idea of making acquisitions and has received feelers from investment banks that there are prospects abroad. “We are still evaluating these options and have not made a firm decision yet. It could even mean setting up a sales office first,” he added. The company is bullish on growth in India even while it is starting off on a relatively small base overseas. Of its total revenues, exports take up about $5 million.

HM’s Uttarpara unit supplies castings and forgings to Avtec which, in turn, caters to the carmaker’s needs of complete engines and transmissions. As Rao said, the objective of creating Avtec was to focus on the powertrain business. “The Indore plant evolved from being an in-house facility to something that we discovered could serve markets beyond HM,” he said. The other job on hand is to explore the possibility of synergising the two factories from the perspective of engineering, purchasing and manufacturing. “There are lessons to be learnt in terms of low volume production in one case and high in the other,” he noted.