Sundaram-Clayton (SCL), part of the TVS group and one of the largest auto-components manufacturing companies in the country said it is well placed to leverage emerging market opportunities in the wake of developments which will lead to higher content of aluminium in all vehicle types.
The Chennai-headquartered company believes, in long term, due to stringent emission norms, fuel economy regulations and adoption of alternate drivetrain technologies, the thrust towards light-weighting was bound to increase, leading to higher content of aluminium in all vehicles.
Presenting the directors’ report to the shareholders in the Annual Report 2021, Venu Srinivasan, chairman, SCL, pointed out that this will enable the company to fast-track growth, since the firm is already a preferred source for aluminium castings to major original equipment makers (OEMs) in India and abroad.
The company supplies aluminium castings for commercial vehicles, passenger cars and two wheeler segments of the automotive industry. The supply chain disruptions caused by the pandemic could have major OEMs review their global purchasing strategies and this could result in a strong push for localisation to de-risk the supply chain, despite cost impact, he said.
Several Indian die casting companies and OEMs have set up new capacities or expanded existing capacities over the past few years. With current market conditions, the capacity utilisation is expected to improve in FY22.
Srinivasan said intense competition makes it extremely difficult to seek price increases to compensate the effects of inflation bringing the margins under severe pressure. However, the company’s supply contracts provide for periodic price adjustments indexed to the international prices of aluminium and this should offer some protection against volatility of commodity prices.
The revenue of SCL is derived from medium & heavy commercial vehicles (61%), followed by two wheeler industry (23%) and the car industry (16%). In the short- to medium-term, on account of a low base, all auto segments are expected to come back to strong double-digit growth. Increase in industrial activity, need for personal mobility, improved availability of funds, will drive the growth of the domestic auto industry, he said.
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