Sona Group takes a step back to go forward
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New Delhi: Sona Group exited its 30-year association with Japanese power steering giant JTEKT Corp. by selling its entire stake on Wednesday.
That shaves off roughly Rs1,600 crore in revenue from the New Delhi-based group that was a Rs5,000 crore company prior to exiting the joint venture with the Japanese firm. The move will make it even smaller in front of local rivals Motherson Sumi Systems Ltd and Amtek Auto Ltd.
The man behind the surprise move is 45-year-old Sunjay Kapur, who inherited the business after his father Surinder Kapur died 2015. Surinder Kapur was one of the doyens of the Indian auto parts manufacturing industry. He was instrumental in setting up the industry after Japanese auto maker Suzuki Motor Corp. decided to produce its small car Maruti 800 in India in 1983.
So what lies ahead for one of the oldest auto component firms? In Sunjay Kapur’s opinion, it is “strong growth” as the Group will now be readying itself for the advent of disruptive technologies such as electrification, autonomous driving etc., which will help it grow at a rapid pace.
“Our larger business is really the forging business, which is the gear business. That’s the business in which we own technology... We felt that we need to make more investments in a business in which we have global scale,” Kapur told reporters.
In the forging business, which falls under Kapur’s German purchase Sona BLW, the group has 20% market share globally. “We are now supplying to Porsche electric from Germany, which is a great opportunity. We are looking at increasing business share within customers,” Kapur said. His firm is in the process of setting up a technology centre in Germany for R&D and an engineering centre in India, which will be inclined towards design and development. The German technology centre will work in the space of futuristic products. “While our revenue may have come down because of the sale, we have great growth plans over the next 3-5 years. We will be increasing our product portfolio, which is related to our gear business,” Kapur said. “To go to Rs2,000 crore of revenue, we need to invest close to Rs500 crore over the next 3-5 years,” he added. This revenue target should suffice for loss in revenue due to exiting the joint venture with JTEKT. Sona JTEKT started the joint venture to make manual steering systems for Maruti but the market moved from manual to hydraulic and later electronic power steering.
In early 2000s, JTEKT increased its equity position to 20% at a time when the Indian market was small. Then JTEKT in 2007 set up JTEKT Sona Automotive India, a subsidiary of Sona Koyo Systems Ltd. JTEKT held a majority stake.
“So, we went from tier I position to tier II position in Sona Koyo. There came a situation where JTEKT wanted to increase stake and they wanted to take product liability and design and technology and we won’t have the technology that JTEKT as a market leader had. So, we thought that it would make best business sense to exit the business so that we could invest in other businesses,” Kapur explained.
“We have partnered them for over 30 years but there comes a time in business when you can’t be emotionally attached,” Kapur added.