Bangalore-based BEML Ltd, a Rs 3,000 crore mini-ratna PSU, is a multi-technology company offering high-quality products for diverse sectors of economy like coal, mining, steel, power, irrigation, construction, road building, aviation, defence, metro and railways. The company was mainly involved in mining and construction equipment and defence business, with a smaller presence in the rail and metro segment. Now with the Centre promoting metro rail as a major public transport system in prime cities across the country, BEML has started laying strong foundation in metro rail business. In addition, the company is also planning to strengthen its presence in new business areas like aerospace, contract mining and IT solutions. In an interview to FE?s Jaishankar Jayaramiah, BEML Ltd?s CMD VRS Natarajan discusses the company?s future plans. Excerpts:

BEML was primarily known for its service in defence and mining & construction equipment sector. Now your presence in the metro rail segment is growing at a rapid pace. How did you achieve this?

The company identified the business potential of metro rail when the concept of metro transportation system was still nascent in India. The company took pro-active steps to acquire technology for state-of-the-art metro coaches from South-Korea based train maker Rotem and established necessary manufacturing infrastructure at its Bangalore complex. This initiative was responsible for BEML winning orders from Delhi Metro Corporation (DMRC) and Bangalore Metro Rail Corporation (BMRC). BEML has also rolled out India?s first standard gauge metro car. BEML is now established as the major supplier of metro coaches in India.

What is your current business mix? Has it changed due to your growing presence in the metro rail segment?

Mining & construction equipment is the major business of BEML and its contribution to the total turnover is above 60%, defence business accounts for 20% and rail and metro contribute close to 20%. The recent metro rail orders have helped to increase the rail business contribution in the company?s turnover from about 5% to 20% and have the potential to reach 30% during the next couple of years.

What is your order book position at present and how much of it is from the rail segment?

BEML?s order book position as of end-January 2010 was more than Rs 5,000 crore consisting mainly of metro rail orders. The company has bagged its metro rail orders against stiff global competition. Currently the company has orders worth Rs 3,681 crore in rail & metro segment. These orders would be executed in the next 2-3 years.

Can you elaborate on the company?s expansion plans?

An investment of Rs 150 crore was planned during 2009-10 towards capex as part of modernisation and expansion in production units. The additional investment will help us achieve Rs 4,000-crore turnover in 2009-10. Also, in order to meet the future business needs, the company?s manufacturing infrastructure at KGF, near Bangalore, has been improved by acquiring 1,109 acres of land along with two workshops from the adjoining PSU Bharat Gold Mines Ltd (BGML). These facilities have now been established as Rail Coach Unit-II for coaches and wagons without investing much capital. We aim to manufacture 50% of the rail coaches at this unit from 2010-11.

What are BEML?s other emerging business plans?

In order to tap the business potential in the domestic and overseas aerospace sector and to take advantage of defence ?off-sets programme?, the aerospace manufacturing division of BEML was launched last year. Ground support & handling equipment, including aircraft towing tractors, crash fire tenders, weapon loading equipment, and jigs for aircraft manufacturing, besides specific sub-systems for aerospace are contemplated under this division. For this, a dedicated facility is being set up by the company at its facility in Mysore, Karnataka. In addition, to tap the potential in contract mining, BEML has entered into a pact with another PSU, KIOCL for taking up coal mining projects jointly. BEML has also entered into MoUs with

NTPC and SAIL for long-term supply of mining equipment and spares and for joint business development in the field of contract mining. Further, recognising the business potential in IT-enabled services, the company has set up a technology division in 2006 to provide e-engineering solutions to clients globally. Currently, this division is operating under four business verticals like auto, aerospace, defence and rail & metro.

Can you elaborate on the company?s new investments?

As a strategic move, BEML is extending the manufacturing facilities beyond Karnataka and setting up its greenfield project at Palakkad in Kerala, where the state government has offered several incentives including land, thereby expanding rail & metro and defence business capacity. The company will invest Rs 260 crore towards this project. BEML is going ahead with a windmill project of 18 MW capacity to be self-sufficient on the power requirements.

What is the status of your defence business?

BEML manufactures and supplies ground support equipment such as Tatra based high mobility trucks, armoured & heavy recovery vehicles, vehicles for missile projects, tank transportation trailers, etc. It also has plans to manufacture Euro II and Euro III engines for Tatra high mobility trucks at its engine division in Mysore. Some of the new projects BEML is planning to take up are SP 155 gun system (tracked and wheeled), 10-metre and 15-metre short span dry-bridge system, Vehicle based Mine Scattering system, Mobile Hospitals on Tatra truck and multi-barrel rocket launching system.

Can you please throw some light on your overseas business?

Tapping unexplored export markets such as Latin America and Australia, opening of co-production units and appointment of dealers/representatives in select countries are some of the strategies adopted for boosting exports. The company posted a record export turnover of Rs 304.78 crore in 2008-09, an year-on-year increase of over 52%. The company has expanded its global reach by opening sales and service offices and international spare parts depots in Malaysia and China, which are expected to significantly boost company?s export business in the coming years.