The Hoshiarpur-based Sonalika Group will pitch its cargo LCV at the big names in the sector even as it eyes growth through the inorganic route.
To cash in on the growth in the light commercial vehicle (LCV) segment, the only vehicle category along with scooters to have bucked the current downturn (growing at 16 percent) in the first half of this fiscal, the Hoshiarpur-based Sonalika Group is firming up plans to enter the LCV fray with the rollout of a one- to 1.5-tonne payload capacity pick-up by end-2012.
Developed indigenously, the LCV will be pitted against the Mahindra Maxximo and Tata Ace and will be manufactured at the Group’s Amb facility in Himachal Pradesh from where the Rhino SUV rolls out. L D Mittal, chairman of the Sonalika Group, told Autocar Professional that its LCV will target the rural and semi-rural centres and other small markets. The Amb facility has a capacity of 36,000 units per annum with the Rhino utilising an annual production of 24,000 units at present. The remaining capacity can be leveraged for the pick-up which will initially roll out in a few hundreds.
Mission buyouts
On other fronts, the Sonalika Group is looking at acquisitions in Europe. The Blackstone Group recently acquired a 12.5 percent stake in International Tractors Ltd (ITL), the Group's flagship company, through its affiliate Blackstone Capital Partners (Singapore) VI in a structured transaction for up to $100 million (Rs 520 crore). These funds are likely to be used over a two- to three-year period to facilitate overseas acquisitions as well as expansion plans.
As part of this exercise, the Sonalika Group recently received approval from the US Environmental Protection Agency to export three models of three- and four-cylinder tractor engines of 45 hp, 55hp and 70 hp. It is currently looking for importers and is establishing a dealer network for engine distribution.
In terms of Sonalika's inorganic growth plans, talks are underway with a clutch of auto component makers in Europe in the areas of hydraulic suspensions, agricultural attachments for tractors, transmissions, brake systems and clutch systems. The chairman expects about two buyouts to be wrapped up by next year with the acquisition to cost around Rs 150-200 crore. Mittal says the acquisitions will enable Sonalika to gain access to advanced manufacturing technology that, when implemented in India, will help to trim production costs even as it is supported by a lower labour arbitrage while maintaining quality and design of products as in Europe.
Growth overseas
ITL has also set up assembly lines in Algeria, Nigeria and Poland for 90 and 125 hp tractors with the fourth production line being built in Turkey. This will go on stream by the year end with about Rs 100-200 crore invested on these new assembly lines. The company, which has plans to expand its tractor manufacturing capacity from 60,000 units per annum to 80,000 units next fiscal and over 100,000 within three years, is targeting growth both from India and overseas.
ITL, with a product range varying from 20 to 90 hp tractors, is aggressively looking to enter the US market for high-powered models. It makes a range of tractors under the Sonalika brandname and ranks fourth in the pecking order after Mahindra & Mahindra, TAFE and Escorts with a market share of around 10 percent. The company hopes to increase its share to 15 percent selling 100,000 tractors. At present it exports to 70 countries and aims to take that to 100 in the next six months in tractors, components and agricultural implements.It currently exports 6,000 tractors and plans to ramp it up to 10,000 units in this year.
The Sonalika Group is targeting a turnover of Rs 4,000 crore this fiscal with tractors contributing the major chunk of Rs 3,000 crore from the current Rs 2,500 crore ($500 million). This, despite the flat growth in the tractor industry. ITL has grown 20 percent this year and expects a growth of 25 percent over the next few years. The target for the next fiscal is a turnover of Rs 5,000 crore.
SHOBHA MATHUR