Raymond eyes $ 1 billion in engineering business

Raymond Group’s chairman Gautam Singhania loves fast cars. He seems to be expecting some fast pace in the Group’s automobile components business as well. The Group’s engineering businesses had drawn up a vision of achieving the billion-dollar mark, an earlier stated plan to touch Rs 1,200 crore by 2016. The target is an ambitious one as the Group’s engineering division’s turnover in 2011-12 stood at Rs 153 crore.

The auto components business, represented by Ring Plus Aqua (RPA)and the recently acquired Trinity India, is expected to touch Rs 300 crore this year. However, the current damp market sentiment has slowed down growth. “We haven’t lost sight of our strategy even as many markets see a downturn globally. In the last two quarters, we could’ve added Rs 50-100 crore to our top line. We are flat in an industry which is witnessing de-growth,” says Harshal Jayavant, president – engineering business, Raymond told Autocar Professional.

Investment to expand is vital for RPA, which is one of the “8 or 9” major players in the ring gear business. The company now plans to set up a new plant in Gujarat, mainly to be close to the plants of Ford India, Maruti Suzuki and Tata Motors. “It is always an advantage to be near our customer. We could install capacity to produce a million ring gears (per annum). We see Gujarat also as a convenient base for exports,” says Jayavant. As vehicle OEMs enhance their presence in Gujarat, RPA expects its Gujarat base to eventually grow bigger than its current gear plant in Sinnar, near Nashik in Maharashtra, whose annual production is to be hiked to touch six million units this year. While RPA manufactures starter ring gears, flexplate flywheel assembly and bearings, a 50:50 JV between RPA and A J Rose Manufacturing Co manufactures pulleys. However, more than production capacity, it is capability that RPA needs to grow to add business. The recent order for flex plates to be used in the automatic transmission-equipped Tata Aria reflects RPA’s growing developmental capabilities. The automatic transmission in the Aria, incidentally, is India’s first indigenously developed automatic gearbox. “We want to become design partners for OEMs. Auto transmission is the future. Going forward, there will be more and more auto than manual and flex plate will definitely be a future product for us,” says Laxman Katakkar, CEO, RPA.

In addition to the partnership with Tata Motors for the automatic transmission, RPA struck another partnership that will easily qualify as its most prestigious development. BMW has chosen Ring Plus Aqua to be a supplier of two key car projects which will see commercial production in the near future. RPA has added new process like laser welding to meet the stringent quality levels of the OEMs.

Trinity is thy name

While RPA, a Tier 2 supplier, is adding new clients to its ring gear business, the added forged components business which came through the acquisition of Pune-based firm Trinity India, a Tier 1 supplier, has also boosted the parent company’s prospects.

“Being a Tier 1 supplier, our guys are now going and sitting in the OEMs’ office, unlike earlier when we would interact only with the Tier 1 supplier to the OEM,” reveals Jayavant. Trinity will also join RPA in setting up the manufacturing facility in Gujarat.

The buyout of Trinity India for Rs 54 crore last February has brought installed forging capacity of 12,500 tonnes and about 400 staffers. The company supplies hubs, spindles, connecting rods and similar components to OEMs like Ford, Maruti Suzuki, Tata Motors, Fiat, Bosch, Eaton and Dana. Jayavant and Laxman strike a positive note as they share notes about the company’s transition from a “built to print” supplier to a solutions provider. Thus far, RPA hasn’t had any collaboration for technology. It has installed certain processes imbibed from its customers. However, it is exploring another acquisition or two to enhance the scale of its business as well as add new clientele. Europe is also on the radar for “niche technology”, which could be an addition to what RPA currently has.

The company will take the acquisition route to cut the lead time in growing its technological capabilities and adding new customers. Simultaneously, it is actively working on entering emerging markets.

“Our immediate plan is to look at Latin America, where we have already started supplying. We will probably go forward and have a manufacturing base in Latin America, where another Group company, JK Files already has a presence,” says Jayavant. The company has already begun working on that strategy. The other significant opportunity is in Indonesia, where again JK Files has a presence. The fast-growing Indonesian industry and its strategic location are highly attractive for both automotive OEMs and suppliers. “You will see something happening in the next 12 months,” Jayavant says, adding that “Indonesia has a Preferential Trade Agreement (PTA) with Pakistan, it has got FTAs (with neighbouring countries). Along with Vietnam, it constitutes the largest growth opportunity. Tatas are also setting up a project there. It could be a good starting point for us (in ASEAN).”

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INTERVIEW WITH HARSHAL JAYWANT, president – engineering businesses, Raymond.



Where does Ring Plus Aqua’s growth curve stand now?

The transition has been from being a built-to-print player or contract manufacturer of CV components to high-precision product category like passenger cars. Moving the customer portfolio from India to USA to Europe. Europe has been a major development in Ring Plus Aqua’s life so far. It has given exposure to high-value customers and high-value products. Now RPA is transitioning into a solutions provider.

Is there a plan to move from being a component supplier to an integrated supplier?

Certainly, that’s a trend. It’s not necessary that a good assembler is also a good component manufacturer. Normally an integrator will have to source components. It all depends on the kind of opportunity. There will always be a place for component manufacturers. Probably the close relation enjoyed by Tier 1 players is something that will make Tier 2 suppliers upgrade themselves. That’s certainly one concern.

In your current business area, what is your plan?

We are ring gear makers and have very close ties with foundries. Over a period of time, maybe we will look at foundries for a certain segment like exports. Our getting into a foundry business will not just be for the flywheel. We will then get into a larger castings space, where flywheels become one part of the business. The larger business could include cylinder heads, housings or many other cast components.

What is the key benefit of acquiring Trinity India?

Between Trinity and Ring Plus Aqua, there were also common customers. Many OEMs are happy that Trinity is now part of the Raymond Group as they feel Trinity can do a lot of things for them now, which they couldn’t do in the past like investing in technology, capacity or setting up plants close to OEMs. Our plan to enter Gujarat will also help Trinity to set up a base near the Gujarat-based OEMs. There’s an added synergy now.

A number of Ring Plus Aqua’s overseas OEMs have started giving RFQs (request for quotation) to Trinity.

Is there any plan to enter the ASEAN region?

ASEAN is a big opportunity. Now, Asia production is growing much faster. Today, the growth regions are ASEAN, Latin America and one should not forget Africa — we have to start thinking and watching the developments there. Everyone’s investing in Africa.

Is China on the radar?

It’s the largest market. At some point of time, one has to be there. However, Latin America and Indonesia are low-hanging fruits compared to China. China is a longer haul for any outsider. Big players have had mixed experiences in China.

In the current scenario, how do you retain talent?

It is always a concern when good people leave. It is also a sign that you are developing good people. Zero attrition sometimes may not reflect well on a company’s ability to develop people. We do more campus recruitment than other companies of our size do. We have the Raymond and JK brand names with us.

SUMANTRA BAROOAH