SKF India to leverage business platforms

The idea is to increase revenue from other potential avenues.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 23 Feb 2007 Views icon6077 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
SKF India to leverage business platforms
Leading automotive bearings company SKF India has chalked out plans to leverage its existing business platforms to increase revenues and market penetration. Businesses pertaining to lubrication systems, asset management systems (AMS) and railways will be given a major thrust. Currently, these form a mere five percent of the company’s total turnover pegged to reach Rs 1,300 crore this fiscal.

The plan also envisages doubling the seals business to 12 percent over the next five years. All this is aimed at reducing the dependence on the bearings business which accounts for 90 percent of SKF India’s turnover. The biggest challenge is to overcome the market’s perception of SKF as a purely bearings (and seals) company. This was a major reason for the slow takeoff in the AMS contracts. Almost three years after starting this business, the value of these contracts is now reaching Rs 30-40 lakh from an initial Rs 5 lakh.

The company has also had to define its own internal competencies and resources to provide optimum services to customers. It has faced stiff competition from a host of smaller players who provide pockets of services like vibration or lubrication systems. Moreover, there have been difficulties convincing the maintenance departments at various customer plants, who saw SKF as a threat to their livelihood.

“We handled this delicately and are only now seeing the fruits of some of those efforts. That is why it has taken us three years to get to a sizable level. The next set of contracts we are bidding for is Rs 3-5 crore,” Rakesh Makhija, managing director, SKF India told Autocar Professional.

While the value of this business is still small, it will help SKF India increase its customer base. These are services designed to improve machine uptime, boost production, reduce maintenance costs and increase safety within the customer’s plant. Significantly, the company has expanded its industrial customer base, which includes players in the metal, oil & gas, food & beverage and process industries.

The auto sector, though, is not a big segment for this business. Makhija says that most plants already have their own maintenance programs in place. The company caters to automotive clients in certain areas like lubrication, vibration, dynamics analysis, dynamic balancing, etc. SKF India has won a contract from Maruti Udyog to run the carmaker’s reliability cell whereby it trains employees at the centre. Going forward, there is a big opportunity to bid for AMS contracts in all auto plants being set up in the country.

LUBRICATIONS FOCUS
Complementing this vertical is the company’s lubrication systems business. It estimates the overall market at Rs 200-250 crore, and growing 15-20 percent annually. Its target is to capture ten percent market over the next two years. Beyond this, it wants to have at least 20 percent of the lubrication systems market. SKF India provides automotive lubrication systems to a number of customers. It also recently won over a major wind turbine client. “This is a small business but it fits in well with our overall portfolio because lubrication systems play a huge part in asset management systems,” Makhija says.

The company is also taking a more serious approach towards its railways business. It has a number of offerings in the pipeline but the principal growth will come from bearings and seals, namely tapered bearing units. “The railways translate into very strong potential for us. We only have ten percent in a market size of about Rs 250-300 crore. Given the right strategies and actions, we can double this fairly quickly,” he adds.

##### SKF India offers two designs for 25- and 30-tonne axle loads for the Indian freight car market. At present, these products are imported but the company is exploring the feasibility of making some products locally.

On the seals business, SKF India is already very strong in the automotive segment. It is now entering the industrial area in a big way through large diameter seals with applications in heavy industries like steel or cement. Towards this, it may have to look at a separate production line since both its plants in Bangalore and Pune are largely focused on the automotive segment. It is likely that SKF will have to increase production by one and a half times its current capacity very soon.

“We have been investing about Rs 110 crores on a 12-18 month cycle. This will certainly continue. We are evaluating the kind of investments required on the industrial side. Over the next 12 months, there will be some concrete action including manufacturing activity,” Makhija says.

EQUAL RATIO
The automotive segment accounts for 95 percent of its seals business. According to him, this will be down to 65 percent while the industrial segment will touch 35 percent. Gradually the aim is to have a 50:50 split. The increasing importance of the aftermarket will also contribute to growth in the seals business.

Driving all these businesses forward will depend on how SKF India handles its many customers in different segments and industries. Over the last year, it established key account managers for specific clients so that they are serviced more efficiently. As opposed to different salesmen for different businesses previously, these managers provide customers with all products in the SKF portfolio. In other words, there is one human interface for the buyer.

“Having three to four people going to the same customer did not make any sense. Now one person is responsible for an account and this person is the customer interface,” Makhija explains.

While this will help bag new orders, the company also scores over competition in technology, brand name and its focus on various segments. It continues to work on new areas, new materials and new methods. The SKF brand is known for reliability and quality. Each of its business vertical provides solutions meant to enhance the customer’s profitability, efficiency and productivity.
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