The auto sector in the country has been growing at over 25%. This growth has enabled the auto-components industry to pick up momentum in early 2010 and is now witnessing aggressive growth at 25%-28% and the industry will touch $22 billion in the current financial year. In this backdrop, with L Ganesh, chairman of the R1,500-crore Rane group, speaks to R Ravichandran of the FE on the outlook for the sector, the changes in the industry and the impact of imports on the industry.
What are the Rane group?s growth plans?
We expect to end the current financial year with 25%-28% growth to touch R2,000 crore turnover mark. We have made necessary investments in the last one year to meet the increasing demand from customers, almost all auto original equipment manufacturers (OEMs), for the next financial year and are drawing up plans for further capacity addition. As the base increases, our objective is to grow a minimum 15% CAGR for next three to four years and we hope we will grow accordingly. This could be possible with the inclusion of new customers into our fold, introduction of newer products, capacity expansion and increasing exports from 15% of the turnover to 25%.
The auto industry is changing, with modern technologies, international-standards in emissions, and better comforts. Is the components industry geared towards meet these requirements?
Except in hybrid, the Indian auto components industry is geared up towards meeting the requirements on all fronts: emission norms, features, comforts with newer technologies. With every other OEM involved in reducing the weight of the vehicle to achieve better fuel efficiency, the auto parts companies have been spending hugely on R&D, newer technologies, and collaborations to take advantage of the huge opportunities in India. However, unlike China, which offers huge incentives to its companies, the central government is not providing enough support on both fiscal as well as on the infrastructure side. Even interest rates have gone up sharply over the years and as a result, many companies find it difficult to access capital. It is evident from the fact that components import will touch $8 billion in the current financial year and will grow further as the duty is reduced to only 7.5%, which will hit the domestic industry hard.
You are also entering newer segments. What are they?
Rane group is examining prospects in aerospace and defence sectors. In fact we expect to make some small investments in 2011-12 in these areas. We are looking at niche electronic components deployed in these sectors, a huge opportunity waiting to be tapped. We want to have joint ventures with those already in this field and need capital to scale up their operations. We are in talks with a few players and are looking at joint ventures that we hope to finalise over the next few months.