We are on a good wicket; have home-grown advantage: MD, Sundram Fasteners

The new MD and JMD of Sundram Fasteners speak on how the company is placed to grow and face the challenges in the future

81-year-old Suresh Krishna recently stepped down as the Managing Director of Sundram Fasteners, part of $7.5 billion TVS Group, paving way for his two daughters Arathi Krishna and Arundathi Krishna, as MD and JMD respectively, to take over the day-to-day affairs of the Rs 39 billion auto components major.

In their first interview, the sisters spoke to Gireesh Babu and T E Narasimhan of Business Standard about their vision and strategy. Edited Excerpts:

What is your vision and what will be your strategy?

Arathi: We have been behind the target of reaching a billion dollars now, but the value of dollar has been going up. In 2006, when I joined, it was Rs 38-40. 

Every year there were real challenges like power, political climate, raw material, tanking of the OE market, recession and the global financial crisis happened. We had enough things happening in the last 10 years. Few exist even now and but we know how to handle it.

Auto is a sunrise industry as penetration is only 15-20 per cent. Infrastructure and rural metropolis need to be built, goods need to be moved. These things cannot happen without transport. Car population is expected to touch 10 million from around 3 million by 2030. The two-wheeler market is expected to grow faster. Overall, I am optimistic and expecting double-digit growth.

We are on a very good wicket since we have the home-grown advantage. Multinationals are attracted to India, but only we know how difficult it is to operate in India. 

Do you have enough capacity and capabilities to tap the opportunities, especially when it comes to new technology like Electric Vehicles?

Aarthi: As far as capacity is concerned, today we have 27 facilities, including one in China. We will be investing around Rs 3.5 billion this year, while every year our general capex is Rs 2-3 billion. We may look at green fields in line with our customers. 

As far as EV is concerned, we are working with all our customers, right from the start, on designing electric vehicles. Though we don't see EVs getting adopted immediately, SFL's 30 per cent of the portfolio is geared towards cater to the EV market.  We also formed a task force internally to adapt and strengthen our capabilities.

Are you open to partnerships or acquisitions in order to build your capability? 

Arathi: Very much. We are looking at the design and R&D space. We need to bolster our capabilities in this area by bringing talent from outside or buy into some design house. We are working with Anna University and IIT Madras on material science, which accounts for 40 per cent of my costs. China has been a very good parallel because the Chinese government is subsidising EVs quite heavily. We have a lot of customers who can help us there. 

How is your Chinese operation performing? Have you started exporting from the facility?

Arundathi: It continues to be profitable. For now, it is catering to the domestic market and clocked Rs 2.5 billion. We are expanding in China with a Rs 1 billion investment for a second plant. 

What is your strategy for exports? Will it help to mitigate the challenge related to currency rates?

Arathi: Today exports account for 30 per cent, of which 80 per cent is to the US, a quality conscious market. As we expand geography and acquire new customers, exports will increase to 50 per cent in 5-6 years.

SFL also caters to non-auto industry including the solar and wind business. How is it growing?

Arathi: The adjacent areas have been pretty profitable for us. Non-automotive business accounts for around eight per cent of the total. The contribution is very good, the size has to go up. We were targeting doubling it to 15 per cent, but everything changed in between since prices of wind and solar energy dropped. But we are well poised and capacitised. When the demand comes in, we will be ready to address it. We are well prepared to scale up in solar, wind, construction, oil and gas, aerospace and defence.