Mi‘n’das Touch?!

IIPM, ADMISSIONS FOR NEW DELHI & GURGAON BRANCHES

We hear that the auto giants are zooming ahead. We asked further – and the part-makers?

Confidence, arrogance, flamboyance…. and well, a brave vision to top it all up – that to say the least defines the Minda Industries, and its chief commandant N.K. Minda, Managing Director of Nirmal K. Minda Group, as well. Well, talk to him and you could sense an impossibly self assured leader who talks with such certainty about his company’s outlook. But when he starts discussing the statistics, one realises the basis for his extraordinary confidence, as he outlines how, after having scaled the $200 mllion turnover mark during 2006 (with 20% contribution through exports), the Minda Group could now pin its hopes on an annual revenue growth of a smashing 40%!

So the question really was – how long would it be before the Minda see the $1 billion turnover summit being conquered? And how does it plan to reach there? As a knee-jerk response, Nirmal thumped, “We want to be No.1 in our product categories. We want to be among the top three in our business line. To achieve it, we need to focus on quality & R&D. So R&D is our major concern, we need to spend time with our engineers.” Talking about where the entity could reach in the mid-term, he explained, “Definitely, we see ourselves in the top 10 or top five for that matter in the near future. Consider a time line of about seven years as we have a roadmap till 2014…” So there you are – all eyes set on the top slot within a decade! But then would the relentless development last long enough for Minda?

To make situation clearer, we decided to understand the whole development in the light of what was happening in the industry. It is estimated that the Indian component industry will be worth a sensational $19 billion by the end of the decade – representing a thrilling 90% growth from the present size! Not surprisingly, with the terrific forecasted growth in market size (with penetration of cars being just over 0.7% today) and with global automotive manufacturers setting up shops and manufacturing units in India, things will only get better by the day for the Mindas Group & the ancilliary industry. Today, the auto component’s net worth stands close to $10 billion with a total of 246 registered players (out of which 90 are listed). Sure enough, getting ahead of this crowd will require sustained focus and long term growth plans rather than just a wild rush of adrenaline. But then of course, considering that the net sales of the industry as a whole even today lies close to Rs.7.88 billion (with a PAT of $0.51 billion), the industry is well-established and only waiting to rise higher. Consider this – the absolute value of exports by Indian component industry is all set to touch a glorious $25 billion by 2014 – mammoth by all standards! However, Minda Group (at a 40% CAGR) will have to run faster than its competitors, as industry growth today is just 30%.

Talking about other initiatives, with $600 million already invested (total planned outlay being $1 billion by 2010), the Minda Group also plans to enter the fast evolving automotive battery segment just as Nirmal divulged exclusively to B&E, “With high growth being witnessed in the sector, ‘batteries’ are also a big business. We are also setting up a new plant in Pantnagar for the manufacture of complete handle-bar assembly. The Minda Group has earmarked $52 million as capex for setting up new plants, expansion of existing facilities and mergers and acquisitions alone…” For the same purpose, a huge 4 million annual capacity plant will be set up in Uttrakhand.

Besides the promises, there are other issues playing on Minda’s mind; investments in R&D being the primary. With big-ticket clients like Audi, Aprilla, Honda, Daimler & Chrysler, it becomes mandatory for the company to showcase unbeatable R&D capabilities both in the short and long-term. Displaying consciousness, a confident Nirmal expressed his intentions to raise the bar for the same to B&E as, “We spend 3% of our turnover on R&D and we hope to increase this to 5% soon. Such is our commitment towards quality that we are the first auto component company from India to set an engineering office in Japan. It shows that we have a policy of moving to various markets.”

Where R&D comes in, innovation must follow. However, the Minda Group displays enough might here as its commitment to innovation is displayed through its international tie-ups with names like Tokoi Rika Japan, TYC Brothers, Valio & FIAMM Spa. Is it any surprise then that 77% of net sales comes from ‘high quality’ demanding OEMs! And Markus Leitner, Director (Corporate) Fitch Ratings, confirms for the positive as far as a stress on innovation is concerned as, “Yes, Indian ancillary & component manufacturers are increasing competition for Western manufacturers…” Hence, where on one hand, localization and cost efficiency are factors which make for a conducive environment, insufficient innovation is seen as a deterrent. But with its latest initiatives, the Minda Group is also set to heal all shortcomings & ensure a better future.

Then there is the depreciating dollar which is seen as a threat to a player like Minda which relies greatly on exports (no surprise as a mighty 20% of its revenues are accounted for by exports alone!). But look deeper and you’d realize how the shrewd entity has managed to go round this cross-currency trap. When B&E investigated, it was revealed that its major export market was Europe – ensuring that a stabler Euro made living easy. However considering that biggest global auto players like GM & Ford operate in the US market, ignoring a volatile dollar will surely not make that $1 billion revenue mark easier to attain!

In the face of cut-throat competition, the company has always embarked upon a revolutionary business model. The company recently rolled out its ‘FMCG model’ which stresses on intensive distribution networks, in order to cater well to the aft er-sales market. The company has chosen the state of Tamil Nadu for the pilot project due to its high density of organised market. Surely, despite being the market leader in switches and apparently the sole organised player in fuel kits for cars, it will have to understand that existing in a high growth industry produces as many challenges as opportunities. Lower margins, stress on innovation & lack of technical expertise will play the devil…. And given that the $1 billion mark is not too difficult given an optimistic outlook, the truth is that ‘while all world’s a stage’, there are many actors too!” And Nirmal needs to get his corporate wheels moving faster…

For Complete IIPM Article, Click on IIPM Article

Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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