 "Prasan Firodia with the Force Gurkha")
As you enter Force Motors' manufacturing plant at Chakan in Pune, you can sense an air of enthusiasm. Employees in red T-shirts are more than eager to explain and coax you into going for a test ride on the Gurkha, the company's off-road powerhouse. The vehicle saw plenty of action in Goa in the recently held Indian edition of the Rainforest Challenge, an international off-road competition and often considered the off-roaders' equivalent of the Formula 1 race.
Force Motors, which also sponsored the Rainforest Challenge, hopes to bring the brawny vehicle in the market towards the end of this month. The Gurkha was unveiled three years ago, and around 250 of them have already been exported to Germany, while a few more are being used in Africa. In India, it has not yet been put up at dealerships. "We were focused on a few other projects and models within the company," explains Prasan Firodia, managing director, Force Motors. "I think this is the right time for Force Gurkha to be made available because the domestic off-road traveller is much more mature now. Also, internally too, we feel it is a good opportunity."
There is an air of expectancy at the company because, at Rs 6.5-8.5 lakh, the Gurkha is among the best priced in its class. The vehicle with its snorkel-exhaust and a Mercedes-Benz engine has already drawn many admirers and is expected to sell well in the niche market.
The company's hopes have been further boosted by the steady rise in its stock price since early September. On September 12, it touched an all-time high of Rs 1,004. For Firodia, it is an interesting juncture because the escalating share price has nudged Pune-based auto manufacturer Bajaj group, which once controlled Force Motors, into selling whatever remained of its stake in the company. The Rahul Bajaj-led Bajaj group recently sold off the stake of his company in Force Motors to cash in on the 83 per cent appreciation in the Force Motors shares in recent months. "We have been off-loading shares in Force Motors since the past many months. We thought we are getting a good price (on the sale). Though we have no direct business relations, we share a very cordial relationship with the Firodia family," Niraj Bajaj, director, Bajaj Group, said in an email to Business Standard recently.
On their part, the Firodias, now led by company Chairman Abhay Firodia, father of Prasan Firodia, still hold a significant chunk in Bajaj firms. Their total holding across Bajaj Auto, Bajaj Finserv and Bajaj Holding Investment is around Rs 3,859 crore.
Bajaj's exit from his company has not ruffled Prasan Firodia. While he prefers not to comment on the stake sale by Bajaj or on his family's future course for their holdings in Bajaj, he says that both the families still share cordial relation. "The Bajajs come to our place, we go to theirs. We meet for dinners, family function and so on," he says.
Falling behind in the race
A cursory look at the financials of the two firms (Bajaj & Force Motors operate in different segments) tells the story of how Force Motors has remained on the sidelines of the country's automobile growth story. Bajaj Auto's net profit of Rs 3,243 crore in 2013-14 was 60 per cent higher than the turnover of Force Motors in the same year. While the company reported a 5 per cent jump in net profit in 2013-14 at Rs 77.69 crore, its sales were impacted by the economic slowdown.
On whether the company opting out of the passenger vehicle segment and focusing on commercial and sports utility vehicles and tractors has made it miss the bus, Firodia says: "Had we started in that segment 10-15 years ago, things would have been different. Today, the average consumer expectation is much higher. So it does not make sense for us to get into the passenger car segment. Product life-cycles are extremely short, volumes at bare minimum are essential to get returns on investment, and the risk levels are substantially higher."
Firodia is also candid enough to accept that the company's foray into the SUV market with the Force One hasn't been too satisfying. "The numbers were not what we had hoped for," he admits. "That segment is completely different to the DNA of our company. However, it has been a learning experience. And these learnings are reflected across our product lines."
He points out, for instance, that because it decided to go in for SUVs, Force Motors had to access technologies like ABS, right-hand handling and electronic brakeforce distribution. "We got into those and now our Traveller mini bus has been fitted with these features. Today they have GPS, parking sensors and other advanced features," says Firodia.
Despite setbacks, Force Motors is not ready to give up on its Force One SUV. It is, therefore, working on strengthening the distribution network. In the other segments of its choosing, it has done fairly well. Firodia says that the Traveller today holds 68 per cent of the market share and is growing. The recently launched 26-seater Traveller further opens up another huge market opportunity for the company. Firodia also says that the company has seen good traction in exports, and the future looks bright. "Though exports constitute less than five per cent of the sales for us, we see a huge opportunity," he says. "In the next three years, we think exports should be 15-20 per cent of our revenues."
Having worked on a focused approach to sell its Balwan tractor, restricting itself to seven markets, among them Maharashtra, Madhya Pradesh, Uttar Pradesh, Bihar and Chhattisgarh, the company claims to have done well in this segment. "In the last three years, our tractor segment has grown at a 60 per cent year-on-year. Though the volumes are low, we are doing extremely well. We are India's fastest growing company in this segment," says Firodia. Once it gets scale in the seven chosen regions, the company intends to increase its presence in other markets.
High on hope
Analyst are betting on Force Motors' revival in commercial vehicles. "With the new government focusing on infrastructure, there will be a big push for commercial vehicles for passenger transport. But as an original equipment manufacturer in the Indian market, players will need to have a clear strategy and a specific roadmap. We see competition for Force Motors not only from domestic players, but also multinational automobile makers and aggressive exporters from China," says Abdul Majeed, partner (automotive practice), PricewaterhouseCoopers .
The company plans to invest Rs 1,000 crore over the next three years on new vehicle projects and branding, among other things. For 2014-15, the capex is set at Rs 200 crore. The company is also expanding the network for its SUVs and tractors as well as working on improving after sale services.
In the next two-three years, the thrust areas for Force Motors will be vans, tractors and niche vehicles like the Gurkha. "Can we be successful in vans, SUVs, off-roaders, commercial vehicles and tractors? All these segments are growing at a significant pace. The van segment is growing the fastest in India. We are the largest manufacturers of ambulance vans in India. India will need ambulances desperately. We might as well take these initiatives ahead," says Firodia.
With the Force Gurkha all set for a commercial launch, the company will, for the first time, also make use of its retail distribution network to market the off-roader. Force Motors has the capacity to roll out 1,000 Gurkha vehicles per month, of which at least 15 per cent will be earmarked for the export market. "There is demand abroad. Off-roading is a small community," says the managing director. "The factory-built car that we will be giving will have all the gadgetry that will allow you to do hardcore off-roading. The demand for such vehicles is also from people who own tea or coffee estates." The company also intends to present the vehicle's capabilities to the Indian defence services. This market could be anywhere between 10,000 and 12,000 vehicles per year and Firodia aims to capture at least 20 per cent of it.
The other big thrust will be to enter into manufacturing partnerships with other automobile companies. Force Motor has already forged alliances with Mercedes and Ford, and recently sewed up a deal with another European automobile manufacturer. Such alliances contribute 25-30 per cent to Force Motors' revenue. "We have been doing all the engines for Mercedes in India. We assemble, test and supply all the engines and axles built in India. We will begin a similar operation for this European manufacturer as well in Chennai," says Firodia.
With the whole automobile sector finally turning the corner after years of sluggish performance, Force Motors has perhaps chosen the most opportune moment to expand its vision. The prospects literally ride on its various products.
Swaraj Baggonkar in Mumbai contributed to this report
