Sundram Fasteners, a part of TVS group, is one of the few companies that retained its faith in the Indian and overseas markets when major auto companies globally buckled under recession. SFL CMD, Mr Suresh Krishna is considered a true change manager- who brought a sense of dynamism and direction not only to his companies, but also to the auto component industry. SFL posted the highest ever profit of Rs 75 crore in 2009-10. An “out of boxer”, Krishna is known for his untiring passion for quality and manufacturing excellence. In an interview to ET, Krishna discussed the company’s performance in 2009-10 and growth prospects.
How do you assess the performance of SFL in 2009-10 considering the recovery in the auto sector after the worst ever global recession?
It was one of the most difficult years. Despite that, we posted the highest-ever net profit of Rs 75 crores against Rs 17.41 crores in 2008-09. Consolidated revenue (including subsidiaries) was slightly less at Rs 1718.51 crores against Rs 1809.49 crores. Exports fell sharply even as sales looked up in the domestic market. We did well riding on the recovery. Our working capital management was under control. We arrested losses on forex loans.
What are the growth prospects this year?
I am very sanguine about the outlook in the current year. The Indian automotive market is growing at 20 to 25%. Generally, for the auto industry and SFL, there is a great domestic market available now. While there is recovery in the US, the only dark cloud is I don’t know exactly when Europe will recover and how Euro currency will behave.
In view of the robust domestic market and recovery in the US markets, we expect our turnover to be over Rs 2000 crores in 2010-11.
What are your capex programmes and expansion plans this year?
Last year, we incurred Rs 66 crores. This year, we will invest Rs 150 to Rs 200 crores on existing facilities. We have formed a technical collaboration with Hitachi for the manufacture of shimless tappets. It will be supplied to Maruti Suzuki’s new K series engines. MSIL will be changing over all the engines to the new series. It will be a big plant with an investment of Rs. 50 crores. The project will be set up at Hosur.
We supply hubs and shafts for the export market from the SEZ unit at Mahindra World City at Maraimalainagar. For supplying these parts to General Motors, SFL received the prestigious “Supplier of the year 2009” award. GM has 20,000 suppliers worldwide. SFL was one of the 76 selected for the award. SFL is the only company from India to have received the award. It is the sixth time recipient of the award. Earlier, for five years, we got the supplier award from GM as the sole supplier of radiator caps. It is an important recognition, since GM has become a big customer for us.
We have also put up a big plant in Uttarakhand to cater to the fairly big auto base in the region. It started with supplying to Tata’s ACE vehicles. Then we got into Bajaj Auto and M &M. Now, it manufactures fasteners, powder metal parts besides oil pumps.
While the SEZ unit will also make sprockets for an MNC, the Hosur plant will supply turbine shafts to another MNC.
You had boldly entered China in 2003 when the Indian industry was debating on the brutal manufacturing power of the Dragon land. How is your experience in the country?
We are doing well. We started with export of fasteners to developed markets and later began supplying to MNCs in China. Now, we will be supplying to Chinese companies. Later, we will start manufacturing Bearing Housings. Our major customers are John Deere, Caterpillar and Cummins. We are expanding our customer profile.
Also, SFL’s arm in China stands to gain from a recent development. Earlier, companies in China were importing from Europe. However, after the change in the duty structure, imports have become expensive. This made the companies to look for sourcing from Chinese suppliers. SFL’s 100% subsidiary, incorporated there, is a Chinese supplier for all practical purposes. It is good for those already having facilities in China. I feel, it will slowly gather momentum.
What I am happy about, is that after five years of starting the factory in China, I think our stand has been vindicated. We are now recognised as a credible supplier of auto components especially among MNCs. Once they start buying the parts, it is only a matter of time for the Chinese companies to join them as they are also upgrading themselves and coming out with new products.
People who came to India in 80s and 90s found it impossible to operate as they had to obtain so many clearances They cursed the Indian system. But, those who stuck to India are doing good business. In China too, you cannot hope to harvest immediately after sowing the seed. You cannot expect to see results in two or three years. It will take 20 years or 30 years. You have to be a long-term player in the market. I have always said SFL is going to be there for 50 years in China.
SFL started in 1966, moved up in the value chain with more products and increased turnover over the years. All these years, it focused on implementing the best global practices.
How are SFL’s subsidiaries in other markets doing?
The UK subsidiary, Cramlington Precision Forge acquired from Dana Spicer Europe in 2004 is doing well. My concern is the fasteners plant in Germany. It is not making as much profit as it was making for the last three years. Once the European auto market recovers, its working will improve.
Despite the global recession, we did not shut down our plants. We tightened our cost structure and everything. We are not the kind of a company operating today and gone tomorrow. We are here to stay. In good times, we will share the benefits. In bad times, we will tighten our belt, but we will never close down our factories. That is what I had told my workers in UK and Germany. Therefore, that fear has gone.
Do you see SFL emerging a strong player in aerospace?
Our biggest business will continue to be auto components. In my view, it will take a long time for the aerospace market to become perfect. I don’t’ want to rush into it. I have told my people to be careful in venturing into the line. At the same time, we have been selected by an MNC (making aerospace engines) for supplying fasteners.
What about SFL’s plan to diversify into non-auto sectors? Will it go for acquisitions?
We could not pursue it last year due to difficult market conditions. We are looking at acquisitions. We are looking for a perfect fit. We don’t’ want to marry in a hurry.
How do you assess the performance of SFL in 2009-10 considering the recovery in the auto sector after the worst ever global recession?
It was one of the most difficult years. Despite that, we posted the highest-ever net profit of Rs 75 crores against Rs 17.41 crores in 2008-09. Consolidated revenue (including subsidiaries) was slightly less at Rs 1718.51 crores against Rs 1809.49 crores. Exports fell sharply even as sales looked up in the domestic market. We did well riding on the recovery. Our working capital management was under control. We arrested losses on forex loans.
What are the growth prospects this year?
I am very sanguine about the outlook in the current year. The Indian automotive market is growing at 20 to 25%. Generally, for the auto industry and SFL, there is a great domestic market available now. While there is recovery in the US, the only dark cloud is I don’t know exactly when Europe will recover and how Euro currency will behave.
In view of the robust domestic market and recovery in the US markets, we expect our turnover to be over Rs 2000 crores in 2010-11.
What are your capex programmes and expansion plans this year?
Last year, we incurred Rs 66 crores. This year, we will invest Rs 150 to Rs 200 crores on existing facilities. We have formed a technical collaboration with Hitachi for the manufacture of shimless tappets. It will be supplied to Maruti Suzuki’s new K series engines. MSIL will be changing over all the engines to the new series. It will be a big plant with an investment of Rs. 50 crores. The project will be set up at Hosur.
We supply hubs and shafts for the export market from the SEZ unit at Mahindra World City at Maraimalainagar. For supplying these parts to General Motors, SFL received the prestigious “Supplier of the year 2009” award. GM has 20,000 suppliers worldwide. SFL was one of the 76 selected for the award. SFL is the only company from India to have received the award. It is the sixth time recipient of the award. Earlier, for five years, we got the supplier award from GM as the sole supplier of radiator caps. It is an important recognition, since GM has become a big customer for us.
We have also put up a big plant in Uttarakhand to cater to the fairly big auto base in the region. It started with supplying to Tata’s ACE vehicles. Then we got into Bajaj Auto and M &M. Now, it manufactures fasteners, powder metal parts besides oil pumps.
While the SEZ unit will also make sprockets for an MNC, the Hosur plant will supply turbine shafts to another MNC.
You had boldly entered China in 2003 when the Indian industry was debating on the brutal manufacturing power of the Dragon land. How is your experience in the country?
We are doing well. We started with export of fasteners to developed markets and later began supplying to MNCs in China. Now, we will be supplying to Chinese companies. Later, we will start manufacturing Bearing Housings. Our major customers are John Deere, Caterpillar and Cummins. We are expanding our customer profile.
Also, SFL’s arm in China stands to gain from a recent development. Earlier, companies in China were importing from Europe. However, after the change in the duty structure, imports have become expensive. This made the companies to look for sourcing from Chinese suppliers. SFL’s 100% subsidiary, incorporated there, is a Chinese supplier for all practical purposes. It is good for those already having facilities in China. I feel, it will slowly gather momentum.
What I am happy about, is that after five years of starting the factory in China, I think our stand has been vindicated. We are now recognised as a credible supplier of auto components especially among MNCs. Once they start buying the parts, it is only a matter of time for the Chinese companies to join them as they are also upgrading themselves and coming out with new products.
People who came to India in 80s and 90s found it impossible to operate as they had to obtain so many clearances They cursed the Indian system. But, those who stuck to India are doing good business. In China too, you cannot hope to harvest immediately after sowing the seed. You cannot expect to see results in two or three years. It will take 20 years or 30 years. You have to be a long-term player in the market. I have always said SFL is going to be there for 50 years in China.
SFL started in 1966, moved up in the value chain with more products and increased turnover over the years. All these years, it focused on implementing the best global practices.
How are SFL’s subsidiaries in other markets doing?
The UK subsidiary, Cramlington Precision Forge acquired from Dana Spicer Europe in 2004 is doing well. My concern is the fasteners plant in Germany. It is not making as much profit as it was making for the last three years. Once the European auto market recovers, its working will improve.
Despite the global recession, we did not shut down our plants. We tightened our cost structure and everything. We are not the kind of a company operating today and gone tomorrow. We are here to stay. In good times, we will share the benefits. In bad times, we will tighten our belt, but we will never close down our factories. That is what I had told my workers in UK and Germany. Therefore, that fear has gone.
Do you see SFL emerging a strong player in aerospace?
Our biggest business will continue to be auto components. In my view, it will take a long time for the aerospace market to become perfect. I don’t’ want to rush into it. I have told my people to be careful in venturing into the line. At the same time, we have been selected by an MNC (making aerospace engines) for supplying fasteners.
What about SFL’s plan to diversify into non-auto sectors? Will it go for acquisitions?
We could not pursue it last year due to difficult market conditions. We are looking at acquisitions. We are looking for a perfect fit. We don’t’ want to marry in a hurry.
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