Rane plans cost cuts amid slowdown fears

The Rane group, engaged primarily in manufacturing auto components, has planned for a capital expenditure of Rs 125 crore in 2005-06.

The expenditure has been fixed in the backdrop of an expected slowdown in the automotive industry.

The Rane group has said that it expects growth in the domestic automotive industry this year to be around 8-9 per cent ( last year's total sales grew 15.9 per cent to record 7.8 million units).

In the backdrop of a slowdown, the group's main focus would be containment of costs, said Babu L Lakshman, chairman, Rane group.

The Rane group, which recorded a turnover of Rs 1,183 crore last year, has concentrated on increasing exports in response to tough times in the past.

Exports of steering parts, engine valves, friction materials in brakes, among others, make up about 15 per cent of the group's sales.

The returns from exports may hit a ceiling in some time. Lakshman said the group, at this point in time, would be comfortable with up to 25 per cent of the turnover coming from exports.

At a level beyond 25 per cent, the proportionate risk in the business goes up because it is not easy to track the key issues in different geographies, explained Lakshman.

The Rane group's exports are directed to both Original Equipment Manufacturers (OEM) and tier I suppliers (the firms that eventually supply components to OEMs such as Ford and General Motors).

Some of Rane's exports of steering components and engine valves are directed to OEMs in US. In brake linings, the company exports to an OEM in Europe, and is looking at the possibility of adding an OEM in US to the list.

Among other things, the Rane group has been looking at niche opportunities in China. Lakshman said that China is not necessarily more competitive than India in auto components.

Therefore, the Rane group is likely to stick to India to service other overseas markets.