In Chennai, we have added one more plant at Vallam which was for our customers Kia Motors, Hyundai and Royal Enfield where we have been doing fully finished castings. We are also adding capacities in our north region Pantnagar, where the order book is very good, said Ramesh Gehaney, COO & ED, Endurance Technology to ET Now. Edited excerpts:
It has been quite a stellar quarter for the company, walk us through the opportunity that you are seeing from the antilock braking system product and what have been some of your key highlights?
To answer your question on antilock braking systems, we embarked on developing this product two and a half years back. The prime reason behind that was that we were a strong player in hydraulic brake systems and as the regulations kicked in in 2019 where ABS became mandatory, it was a very natural graduation that we had to embark upon. We found a technical partner for that and since then we have been working on the product.
The testing and all of this product is at an advanced stage and we are very confident that by September or October of this year we will be on board as far as regular sales are concerned to the OEMs. So, I would say that this was a very important product for us. It was a very important product that we had to take forward in our portfolio and it was something that very naturally aligned to our existing business model of brake systems.
What about the impact of the second wave on the automobile sector, what have you observed by way of buying trends domestically versus globally?
There are many discussions around this subject and of course it is a very important point to discuss. The second wave, if I look at the comparison of previous year and this year, I think just because the numbers surged so much that it was probably out of control. But there is a positive change point over there that home quarantine was allowed and a lot of people were able to take good precaution at home and that is why the hospital care industry did not have so much of pressure. If the home quarantine was not allowed, they would have actually got into serious trouble. Although the healthcare centres and the hospitals were overburdened with a lot of patients and there are many horror stories about the second wave, but nevertheless I would say that we are slowly moving out of this wave and vaccination has helped people a lot.
The more we intensify the vaccination part of it, it will be better for everyone around and everybody should get protected with the vaccination; sooner the better. The government also has to play a very important role on accelerating this process of vaccination. As far as the impact on industry is concerned, yes, there have been lockdowns sporadic or planned lockdowns mainly because the cases in Maharashtra, Delhi, Bangalore, everywhere, were shooting up and it was very important to have these lockdowns. The positive point is that the industry was not locked down. The operations were continuing, so there was no issue on the supply chain part. But as far as the dealers opening is concerned, they are still closed. So, the demand side is still subdued, or rather it is not happening at all. And once the dealers open, I think things should start flowing back to normal.
What is the impact on the order book at this point given some of the factors you have described?
Let us look at the overall year. Q1 of the last year was very bad for everyone. April was zero sales and May was just about 25 and so on. So, Q1 was very bad for everyone and that is the period when everybody was targeting to come back into production, sales and revenues. As luck would have it, the OEMs, the auto industry performed exceedingly well and we saw a V-shape recovery.
Effectively, the up move on numbers and all helped the auto component industries very much and of course the auto industry also. Effectively, nine months we have been able to clock somewhere around Rs 650 crore of business and I would say that in a difficult period like this, it was something very good to achieve. On top of that, we have got somewhere around Rs 1,500 crore of RFQs in hand which we would definitely try to encash on maximum and have a good business win or good percentage business win out of these RFQs.
What about utilisation trends, the plans you are putting in place?
I think bikes are changing and hydraulic brake system is coming into play for all the 125 cc and above, and even in some cases the 110 cc is housing the hydraulic brake systems. That is the place where we have got a clear advantage and we are almost doubling our capacities over there. In Chennai, we have added one more plant at Vallam and that was for our customers for Kia Motors, Hyundai and Royal Enfield where we have been doing fully finished castings. We are also adding up capacities in our north region Pantnagar, where the order book is very good.
As far as order book and capacities are concerned, we are doing our best to utilise to the maximum although the lockdowns and all are definitely having an impact on the utilisation; especially in some of the plants where they are largely dependent on a single customer. They are affected because of the lockdowns, and some of the OEMs who have taken a longer haul on the stoppage are a bit of a concern to us. But looking forward, I think everybody is planning to open back by 24th of May or latest by 1st of June. That is where I expect that the dealer outlets will open and the consumption patterns will definitely improve.
Your dependence on two-wheeler, and especially one client historically is what everybody has questioned. The two-wheeler market right now is getting brutally competitive and in the last two, three months the two-wheeler market has started peaking out. Is that a serious concern?
No, not at all. First of all, I must tell you that the auto industry works on a certain pattern of vendor base. Each and every company, or largely most of the companies, have got one large customer dependence. But that was quite some time back when we were dependent largely on one customer and that we take as a matter of strength, not as a matter of weakness – that our customer concentration is more towards one customer.
Although, if you look into today’s situation, we have got all the customers of India to our product portfolio and we are expanding very fast with all these customers. It is just that the expansion that you do with certain customers where you put a higher share of business and higher contents of products, that is where you get higher opportunities and bigger opportunities to grow faster.
That does not mean that our concentration on other customers is not as intense as it should be. We have new business wins from practically all customers. Let me take the example of TVS, where we have got brake orders for close to Rs 200 crores at the peak value. We have acquired new orders from practically all the customers – Yamaha, Honda, Hero, everyone. So, I think the more we find space for our products, the more we intensify our engagement with our customers. We are totally focussed on getting more business from all of our customers, not a specific one. Although, we would like to be growing all our four product lines to a large share of business with all the customers.
