Bagla ready to face Thai challenge

“Fear is never a solution and fear is never a situation that one should be thinking about. One should get one’s act together well in time to understand what is going to be the strategy.”

This is what Bagla Group’s joint managing director Rishi Bagla has to say when asked the likely impact of the Indo-Thailand free trade agreement on the component industry. He does concede that Thai suppliers are a threat and that it will be a challenge but “at the end of the day challenges are what it is all about”. Bagla is confident that his group and its flagship company, Aurangabad Electricals can more than hold their own and reiterates that India’s strength lies in producing quality products that can compete with any country in the world.

The group also gives importance to R&D, spending about 7-8 percent of its turnover on upgrades of tools, facilities and systems. The target is to achieve a turnover of Rs 1,000 crore by 2010 by which time exports will account for 25 percent; the four-wheeler business will have grown to account for 50 percent of total volume. Aurangabad Electricals contributed to Rs 243 crore of the total turnover of Rs 300 crore last fiscal. By 2010, this company’s share is expected to grow to a level of Rs 900 crore.

To fuel its growth, the Bagla Group is investing Rs 150 crore. A critical part of this spend involves Rs 32 crore in a new aluminium die casting plant (now in operation for two months) and Rs 26 crore in its three-month-old high tensile fasteners plant. “The growth in our business will come from the aluminium die casting and fasteners businesses. These are the two segments that we have taken as the growth strategies and plans for our group,” says Bagla.

The Group sees its export target being achieved through shipments to markets in Europe amd the US. It is not considering Southeast Asia or China for the moment. “We feel we can get the best value of quality from western countries right now. That is the objective of looking at exports and setting up facilities in that part of the world,” he adds. Even so, Aurangabad Electricals has found an opportunity in Indonesia where it is exporting 10,000 wheel rims a month to Indoparts to cater to the replacement market, an executive revealed to Autocar Professional. He added that the volume of exports to Indoparts is likely to go up to 20,000 to 25,000 wheel rims a month in two to three months given the demand in Indonesia.

The company supplies 5,500 wheel sets including CKDs (capacity 8,000 wheel sets) to Bajaj Auto every month. It is also the single source of brake systems for the company’s two- and three-wheelers. Bagla also revealed that his group is among the list of 16 vendors that Bajaj Auto is taking to Pantnagar, Uttaranchal for its bike plant estimated to roll out a million units. He, however, refused to elaborate saying that the finer details of the plan were still being worked out. The Group is, however, not involved with the new generation three- and four-wheelers that are being commissioned by Bajaj Auto in Chakan at an investment of Rs 750 crore but is a strong contender for aluminium die casting and fasteners. It already has a manufacturing facility in Chakan.

The Bagla Group has also begun working with Tata Motors and is supplying parts to the Ace mini-commercial vehicle. It is also keen on being a part of the Rs 1-lakh car project, according to Milind Ajgaonkar, vice-president (marketing), Aurangabad Electricals. “We have already started working with Tata Motors for some of their projects and are going to approach other OEMs also very soon,” says Bagla. In its aluminium die casting business, the Group will supply products to both its existing Tier-1 customers while targeting supply of certain components directly to OEMs.

He is also confident that his company can create a niche for its fasteners business where big players like Sundram Fasteners are doing very well. The Group has announced that it will increase its present capacity of 400 tonnes of fasteners a month to 650 tonnes, and subsequently to 800 tonnes the year after. “This is by no means a small task for an upstart business. But what we see in the fasteners business is a huge market and a tremendous requirement of quality suppliers. It is not about numbers but about the quality which is going to decide who is going to stay (in the market)," says Bagla.