Auto parts firms enter industrial, rail segments to beat slowdown

Auto parts firms enter industrial, rail segments to beat slowdown
Comment E-mail Print Share
First Published: Mon, Aug 25 2008. 11 47 PM IST
Updated: Mon, Aug 25 2008. 11 47 PM IST
Mumbai: Top Indian auto parts makers, caught between a global auto slowdown and a drop in volumes for the first time in three years at home, are branching out into industrial and rail segments and trying to raise sales in Europe and Japan.
Higher input prices and costly finance have seen India’s domestic car sales fall an annual 1.7% in July, their first decline in about three years.
The country’s biggest forgings maker, Bharat Forge Ltd, expects revenue from non-auto segment to reach 40% by 2011-12, from 18% now. It is expanding its non-auto segment and concentrating more on Europe to allay risks of rupee appreciation in the long term, said Angel Broking Ltd analyst Vaishali Jajoo.
“Bigger companies like Bharat Forge have the expertise to diversify into the non-auto segment. Large auto ancillary companies are looking to diversify into non-auto segments now, as they have reached higher levels of consolidation in their manufacturing segments,” Jajoo said.
Motherson Sumi Systems Ltd is also attempting to grow in Europe and Japan. “We are de-risking our model by not just depending on one market alone but building in different portfolios,” its chief operating officer Pankaj K. Mital said.
Motherson is also focusing on enlarging its non-auto segment that covers construction equipment, tractors and material equipment. This segment comprised 15% of total turnover in FY08, Mital said. “We are enlarging this part of our business as part of our overall objective to grow substantially,” he added.
Ball bearings maker NRB Bearings Ltd plans to boost the share of its industrial segment sales from the current 20%.
“We are looking at increasing automotive sales overseas and increasing industrial sales in India,” NRB’s president Harshbeena Zaveri said, adding there were higher margins in farm equipment, switch gears, and textile machinery.
Amtek Auto Ltd, one of India’s largest auto parts firms, in February formed a joint venture with American Railcar Industries Inc. to tap the expanding railway wagon sector in India. Earlier this month, it signed a joint venture with FormTech Industries Llc. to set up a forgings unit.
“Diversification is becoming a motto for Amtek Auto too, though it is still focusing on its core auto components market,” Angel Broking’s Jajoo said.
Amara Raja Batteries Ltd, India’s second largest auto and industrial battery maker, is pumping Rs52 crore this year to raise its industrial battery capacity to meet growing demand from telecom equipment makers.
The revenue split between auto and industrial divisions is almost equal for Amara Raja, a Chennai-based analyst, who declined to be named, said.
The slowdown in demand Amara Raja faces from original equipment manufacturers is partly offset by robust demand from both the auto replacement and industrial segments, he added.
Comment E-mail Print Share
First Published: Mon, Aug 25 2008. 11 47 PM IST