India Can Emerge As An Important Outsourcing Base For MHI

Updated: Nov 15 2003, 05:30am hrs
Michihisa Udoguchi, General Manager of $22 billion Mitsubishi Heavy Industries, Ltd (MHI) with presence in over 700-product segment, has been heading the India operations for more than four years. He has been with Mitsubhishi for the last 32 years. Responsible for new business development for MHI in south Asian region, these days Mr Udoguchi is focussing on the power sector in India. He spoke to Sangeeta Singh of FE about MHI growing interest in India. Excerpts:

What are the factors behind Mitsubishis increased interest in the Indian market
MHI finds both China and India as most potential, and lucrative markets amongst the emerging ones. Besides, the Indian government has brought about whole range of changes in its economic policies. The whole investment scenario in India is changing drastically which is attracting a whole lot of foreign companies, and MHI is one amongst them. The economic environment in India has improved a lot and the signing of the Free Trade Agreement (FTA) and other bilateral agreements, has sent a very positive signal to investors and MNCs.

So Mitsubishi Heavy Indu-stries plan to increase its presence in Indian market
We are currently evaluating the possibilities. As of now we have a liaison office and a project office but if our study yields positive result and is evaluated as viable, we may set up a new entity as an option. MHI works through local subsidiary companies and liaison offices all over the world and we change from one form to another depending on how our business take shape in respective countries.

The company has just initiated a detailed study to identify the products to focus on and look at the various options to conduct business. Mitsubishi Heavy Industries recently held its annual Indo Asian (Pan Indian Ocean) strategic meeting in India for the first time. In this meeting we arrived at a conclusion that India could have a full-fledged manufacturing operation in areas where the country has specific advantage.

In India, what are the areas that MHI is present
MHI is present in over 700 different product segments but as of now, we are executing 900 MW (megawatt) hydro electricity power project in West Bengal, belonging to West Bengal State Electricity Board. MHIs portion is limited to supply of hydraulic gates, penstock and water turbines. MHI has already set up a separate project office to execute this contract.

We also have interest in various kinds of products depending on their techno-commercial feasibility and economic viability. These would range from equipment in power generation sector, chemical and petrochemical plants, fertiliser plants, rail transport sector, road and port development related equipment and various kinds of industrial machinery like machine tool, plastic machinery and printing machinery.

How do you evaluate the Indian market vis-a-vis the Chinese
Well, India is the second biggest emerging market for us after China in Asian region. But China definitely holds more potential for us than India. In terms of population size China is around 1.3 billion and India is just about 1.0 billion.

In terms of per capita income China is $800 compared to $460 of India and in terms of potential buyers whereas the Chinese market has a population size of approximate 300 million, the Indian market has potential buyers say of around 150-200 million people. Currently MHI export to China is worth approximately $800 million. However, the market in India is growing and should catch up with China in next 10-15 years. I strongly feel that the Indian market occupies big importance for MHI. MHI is firming up its long-term plans for India and wants to have sizable presence here.

What is MHIs assessment on the growing outsourcing business from India
We have been procuring components from India in the last 5-6 years for our various products, which are exported to the world market. MHI has cultivated vendors mainly in South India and our factories in Japan are importing $3-4 million worth of components from India. Currently MHI has around 80 vendors. But I need to stress that Indian companies sometimes fail on account of delivery time and quality adh-erence, as compared to companies in other Asian markets. Mitsubishi Heavy Industries is dealing in more than 700 products worldwide and India can emerge as an important outsourcing base for us.