Bosch Ltd, the largest supplier of automotive components and fuel injection systems to the original equipment manufacturers (OEMs), expects a growth of around 20 per cent during the present financial year, which is better than the industry expectations. V K Viswanathan, managing director, Bosch Ltd, explained to Mahesh Kulkarni on the prospects of the company for the year ahead. Edited excerpts:
Bosch has shown a handsome growth in sales and profitability during the first quarter of this year. What are the factors that contributed to this growth?
Basically, three factors have contributed for the growth. Firstly, all the three segments like the commercial vehicles, passenger cars and tractors did post double-digit growth and that resulted in good increase in our sales by 31 per cent compared to last year. Secondly, over the last two to three years, we have been keeping a tight control on indirect expenditure, particularly on items like repairs, consumables and such other items and that has also helped in the overall improvement in the profitability.
Finally, in the year 2008-09, when the Indian commercial vehicles sales affected as a result of slowdown, we had cut our capital expenditure which had resulted in lower depreciation. Now, we have restarted investing from this year and these investments will manifest in higher depreciation in the future quarters. But in the March quarter we had the benefit of lower depreciation. These factors contributed to the improvement in operating margins. All this together with the aftermarket sales has resulted into the net sales growing at 31 per cent, operating profit by 40 per cent and profit before tax was up by 38 per cent.
How much could you save as a result of the cut in indirect expenditure during the quarter?
Not just in this quarter. We have made savings in the last two to three years. Our expenditure used to be 17-18 per cent of our overall sales. Now it has come down to less than 15 per cent of the sales.
What is the kind of investment you would be making this year?
We would be investing close to Rs 450 crore during the next one year and over the next three years we would be investing about Rs 1,500 crore as per the plan. In the last few years we have been making Rs 300-400 crore annually. The proposed investment would go into capacity expansion and additional R&D assets. We will also invest in our infrastructure like improving production facilities and quality across all the production facilities in the country. Overall, for the Bosch group, we will invest roughly Rs 3,000 crore in the next three years in India.
Which segment of the automotive industry has shown a good growth for the company in Q1?
During the first three months of this year, we have seen good performance in all the segments. Especially, the passenger car segment performed quite well. If you look at the production figures during the first three months, the passenger car segment posted a growth of 27 per cent, the commercial vehicles grew by 16 per cent, and tractors segment grew by about 30 per cent and the three-wheelers posted 20 per cent growth.
Unlike other segments, the Gasoline Systems division clocked slower growth of 9.9 per cent during the quarter. What were the reasons for the slower growth?
This is basically because of the interplay between diesel and gasoline systems. Growth in diesel segment is very high basically due to higher growth in the commercial vehicles and tractors sales.
The Society of Indian Automobile Manufacturers (SIAM) has forecast slower growth for the automotive industry during the current financial year at around 12-15 per cent compared to 26 per cent last year. How will this impact your sales this year?
It is not a slowdown in the traditional sense. Last year, the entire auto industry posted double digit growth of around 30 per cent. What the SIAM has said is that the growth will not be this much in FY12 because of the larger base. During 2010, we had the advantage of lower base compared to 2009. Considering the higher base this year, the growth of 12-15 per cent is absolutely healthy. If the economy grows at 8-8.5 per cent the growth of 15 per cent for automobile industry would be very healthy.
What is the outlook for Bosch in the remaining quarters of this year?
Unlike the IT industry, we do not give any guidance for the auto industry. I do not venture to forecast the growth for the next nine months. Traditionally, the second quarter of every calendar year is comparatively weaker quarter for the industry. Going by the performance of the first quarter we can expect a growth of about 20 per cent for the full year.