Tube Investments to focus on other businesses to reduce exposure to auto

Growth in these businesses will have to come from both organic and inorganic means over next 3-5 years, says firm's MD Vellayan Subbiah

The Murugappa Group's engineering firm, Tube Investments of India (TII), has said that it is focusing on a set of businesses to reduce its dependence on the auto sector and its cyclical nature. The firm sees a lot of opportunity in its present business mix, which it intends to expand in the future, said a senior management official.

Growth will have to come from both organic and potentially inorganic means over the next 3-5 years, said TII managing director Vellayan Subbiah.

"We are focusing on a set of businesses that should hopefully reduce our dependence on the auto sector and its cyclicality, which is affecting performance year after year in terms of top line growth. Going forward, we are committed to articulating a clear path and build a resilient edge that will transform TII into a globally admired, Indian Engineering Company," he told shareholders in a letter in the company's annual report.

With its presence in engineering, metal formed products and bicycles, products addressing automotive, railway, construction, mining and agriculture sectors among others, it has forayed into TMT bars and truck body building businesses of late. The company is exploring opportunities in optic lenses and other vision systems for the auto industry.

The TMT bars and the truck body building businesses are more like venture capital investments at the incubatory stage, which need time to grow and will therefore not have any significant impact either on its topline or bottomline in the near term. The truck body building business is planning to shift from the outsourced model of operations and to set up its own manufacturing facilities in Chennai, Bawal, Chakkan and Kolkata for product development, standardisation and scalability.

The initial infrastructure has been created in the optic lens space and the production is likely to be ramped up in the coming year. Acquiring capabilities to manufacture vision components would provide leverage towards climbing the value chain which supports multiple sectors and industries, said the company.

M M Murugappan, chairman of Murugappa Group has said that the company's presence in the auto sector was impacted by the industry slowdown due to reduced offtake from Original Equipment Manufacturers recalibrating their capacity utilisation. Despite the fall in the order book, the company increased its customer engagement, partnering with auto majors and leveraging its engineering expertise to develop new products for the BS VI migration in Passenger Vehicles, tubular front fork products for the two wheeler segment, and safety critical parts in seating solutions for both the Indian and global market.

"To counterbalance the slowdown in the OEM business, the company’s strategic sectoral shift to mine the opportunity in the aftermarket, with innovative products and an expanded channel, proved a game changer in a challenging year," he said.

The  Aftermarket. Value-add new products, are catering both to the high-end spectrum of the market for higher displacement bikes and innovative types of new chains for the standard segment were launched. Leveraging its multi-layered distribution infrastructure to expand geographic spread and deepening channel presence proved helpful in increasing aftermarket volumes, said Subbiah.

Under the Metal Formed business, the company has successfully completed 3 new car door frame projects for Hyundai during FY20. Sale of automotive chains dropped by 12 per cent and industrial chains grew by 10 per cent when compared to 2018-19 in volume terms. Doorframe sale volumes were lower by 16 per cent during 2019-20, as against the passenger car segment’s contraction of 15 per cent due to higher sales on select models with two auto majors.The company has also developed new products for BS VI automobile segment, to counter the downward trend.

Meanwhile, under its railways business, the company has started supplying parts to metro train manufacturers in the country for the coaches plying both in India and overseas. It also launched 70 new bicycle models during FY20,  with expansion in the entry level, economy range portfolio. It has also refreshed and launched 53 models, to improve performance of the business segment where it has exited the institutional business earlier.