Auto ancillaries step into diverse sectors

Prior to the recession, a few auto component players including Sundram Fasteners, Lucas TVS, Rane and Autotech Industries, had ventured into aerospace, given the potential of 50 per cent offset clause (opportunities for indigenous manufacturing) and the business opportunities in it. V Sumantran, Chairman of Celeris Technologies and former CEO of Car Business, Tata Motors says, “The motivation to diversify is a valid one as businesses do have opportunity to develop competencies in adjacencies of their existing business.” 

However, the entry of the aforementioned into the aerospace business did not take off as projected forcing some of the auto component companies to either exit the business or look at other diversification areas to sustain their operations. For instance, in November last year, the holding company of Rane Group, which was upbeat about the aerospace sector, divested its 45.26 per cent stake in  SasMos HET Technologies. Rane Holdings had forayed into aerospace by buying 26 per cent in the Bengaluru-based SasMos in 2011. Thereafter, it even raised its stake before choosing to sell it off last year. 

“It is the high degree of uncertainty that has put pressure on the firms that were keen to thrive in the aerospace business. The cumbersome process of certification and no clarity in policy have hit them hard. What is the use of investing today in the business of critical components which can fetch you revenues only after 10 years? Eight years waiting period for a policy direction or crafting business plans on investments made are not easy. Consider the aircraft, helicopter or battle-tank deals, it is the long gestation period to get the final order that have hurt the businesses hard,” Sumantran points out. 

The failure prompted the auto component makers to set off on yet another exploration. Auto makers such as Autotech Industries and Super Auto Forge are some of the companies that are aggressively exploring newer avenues of business. 

Autotech Industries, for example, catering to customers such as Ashok Leyland, Cummins, Eaton, GM Corporation, Iveco, John Deere, New Holland, Scania, Tata and Volvo is now deploying its engineering skills in a new area – the agri business. It has readied an agro-engine ‘Techengines’ that is slated for launch soon. Says Autotech Industries co-Founder KS Jeyaraman, “There is a good market for  this product in South Africa. But we will first cater to the domestic segment before exploring the export markets.” Initially, the company is expecting its volume of business to touch 1,000 units and though the pricing is not yet fixed, it could be in the Rs 20,000 range. 

Quality expert S Ramachandran, who has been directing the business strategies of the Rs 530 crore Super Auto Forge, hails the culture of engineering. “That is what is driving enterprises such as Super Auto Forge to look at non-auto components business. It has been exporting Rs 60 crore worth of industrial values, precision components to overseas markets,” he says, noting that specialisation in machining and plastics have expanded the scope for entrepreneurs. The tooling, machining and precision manufacturing capabilities, industrial climate and the turbulence in auto parts business have worked in their favour to gear up for future recessionary trends. 

CRP Tools MD C Kumar observes that his company is currently in the consolidation phase. The Rs 45 cr entity has products lined up that will make it consider a prudent opportunity to foray into non-auto components.  “We are in the contract manufacturing side. Our pressure die-casting abilities have made us create gas regulator products for commercial environment based on the design and specifications of our principals,” he says, highlighting the fact that it is the auto OEs who have the ultimate control of driving efficiencies and other business strategies. 

No other industry drives technology-oriented products to get better in the innovation space as automotive, Kumar says, adding it is the core competency in manufacturing that will determine the path for entrepreneurs, who are engineering the graph of growth for auto component businesses. Sumantran sums up “the entrepreneurial element cannot be separated from technical side. The game played on only one card cannot succeed.”