FAG Bear­ings In­dia to strengthen man­u­fac­tur­ing foot­print

Auto components India - - CONTENTS - Story by: Ashish Bha­tia

Fag Bear­ings, one of the 3 Scha­ef­fler Group com­pa­nies, the other 3 be­ing INA and LuK, has an­nounced that it is con­fi­dent of sus­tained growth in In­dia through its whol­ly­owned sub­sidiary, FAG Bear­ings In­dia, which was es­tab­lished in the mid-60s. Spe­cial­is­ing in the man­u­fac­ture of au­to­mo­tive and in­dus­trial prod­ucts, the com­pany has a pres­ence in the OE as well as the af­ter­mar­ket.

The au­to­mo­tive prod­uct port­fo­lio of the com­pany com­prises ball bear­ings, wheel bear­ings, cylin­dri­cal roller bear­ings and spher­i­cal roller bear­ings rang­ing from 35mm to 320mm. For the com­mer­cial ve­hi­cle in­dus­try, the com­pany sup­plies a wide va­ri­ety of bear­ing types in­clud­ing ta­pered roller bear­ings, insert units, hub units, axle mod­ules, etc. The com­pany also sup­plies seals and seal­ing kits for heavy com­mer­cial ve­hi­cles. The wheel bear­ing re­pair set WheelPro, which the com­pany of­fers, is part of wheel bear­ing sets that find use in trucks. Bullish about sus­tained growth in In­dia, the com­pany will con­tinue to fo­cus on high vol­ume busi­ness.

Per­for­mance in 2016

In its An­nual Re­port for 2016, the com­pany in line with its strate­gic con­cept, ‘Mo­bil­ity for To­mor­row’, has stated that it will fo­cus on 4 ar­eas – ecofriendly driv­ers, ur­ban mo­bil­ity, in­ter-ur­ban mo­bil­ity and en­ergy chain. In 2016, the com­pany’s to­tal in­come was Rs 18,821.6 mil­lion, up 5.7%, as com­pared to the pre­vi­ous year’s in­come of Rs 17,805.9 mil­lion. Profit be­fore tax (PBT) was Rs 2,984.5 mil­lion, and marked a growth of 1.6% over the ear­lier fi­nan­cial year ow­ing to the ad­verse sales mix. The com­pany’s sales to mo­bil­ity sec­tors grew in line with the mar­ket growth. Sales to tech­nol­ogy and in­no­va­tion driven sec­tors reg­is­tered above av­er­age growth too. If tech­nol­ogy and in­no­va­tion driven sec­tor sales reg­is­tered good growth, the sales per­for­mance of af­ter­mar­ket and dis­trib­u­tor sec­tor suf­fered on the back of price and cash pres­sure. Ex­ports growth was stag­nant last year. Out of the over­all ex­port pie, Asia-Pa­cific con­sti­tuted of 46% fol­lowed by Europe closely at 42%. Re­main­ing ex­ports are cred­ited to Amer­ica.

Strat­egy

The strate­gic ap­proach of the com­pany is ex­pected to re­sult in strong long-term gains. The proven suc­cess fac­tors of qual­ity, tech­nol­ogy and in­no­va­tion and a ro­bust and sys­tem­atic or­gan­i­sa­tional ori­en­ta­tion to­wards the fu­ture are ex­pected to con­trib­ute to the sus­tained growth of the com­pany. Con­tin­u­ing to fo­cus on high vol­ume busi­ness, the

com­pany ex­panded pro­duc­tion of ball-bear­ings at its Savli plant. It will con­tinue to in­vest in ex­pan­sion of man­u­fac­tur­ing and en­gi­neer­ing foot­prints in the coun­try as per the re­port. Em­pha­sis­ing the im­por­tance of ef­fi­ciency and cost con­trol as crit­i­cal suc­cess fac­tors in In­dia, the com­pany ac­cel­er­ated im­ple­men­ta­tion of Scha­ef­fler Group pro­grammes like, ‘Fit for qual­ity’ and ‘Move’ across all ar­eas of op­er­a­tions with a view of re­al­is­ing op­er­a­tional ex­cel­lence. A struc­tured hedg­ing pol­icy is also said to be used as a fire-wall against volatil­ity in for­eign cur­rency. This is ex­pected to help to curb neg­a­tive Forex im­pact.

Last year’s out­look of con­tin­u­ing re­place­ment de­mand in the medium and heavy com­mer­cial ve­hi­cle seg­ment, apart from the re­turn of light com­mer­cial ve­hi­cles to pos­i­tive, has made FAG Bear­ings In­dia con­fi­dent of good growth. Last year the com­pany ben­e­fited from an in­vest­ment of Euro 150 mil­lion un­der­taken over the last 3 to 4 years. Al­most half of the Euro 150 mil­lion was in­vested in the con­struc­tion of the FAG Savli plant, which went on stream in 2012. Some amount was also in­vested in the mod­erni­sa­tion and ex­pan­sion of the Vado­dara plant.

In­volv­ing the ex­pan­sion of other Group plants in Pune and Ho­sur, the Euro 150 mil­lion in­vest­ment is in-line with the Group’s strat­egy to strengthen the man­u­fac­tur­ing foot­print in In­dia as well as con­tin­u­ous de­vel­op­ment of R&D and ad­vanced en­gi­neer­ing ca­pa­bil­ity. FAG Bear­ings In­dia prod­ucts find use in cru­cial as­sem­blies and mod­ules like driv­e­train and chas­sis. These are known to be not just cru­cial to the safe and smooth func­tion­ing of an au­to­mo­bile, but also sub­ject to adap­ta­tion and de­sign changes to meet the lo­cal de­mands.

Com­pe­ti­tion

The bear­ing in­dus­try is a highly com­pet­i­tive one. The slowdown of econ­omy in China, and the un­der­util­i­sa­tion of global ca­pac­i­ties have in­ten­si­fied com­pe­ti­tion in In­dia’s bear­ing mar­ket. Be­sides com­pe­ti­tion from re­puted global brands, the mar­ket is wary of the grow­ing pres­ence from Chi­nese bear­ing brands. The Chi­nese brands are look­ing to lever­age their large do­mes­tic ca­pac­i­ties, to­gether with non­trans­par­ent eco­nomic en­vi­ron­ment by of­fer­ing very low prices.

Re­lief on the cost front came from the pro­tec­tive duty sup­port to steel man­u­fac­tur­ers and pro­ces­sors the gov­ern­ment pro­vided in 2016. The in­verted duty struc­ture, how­ever, does not sup­port com­pet­i­tive­ness of the In­dian bear­ing in­dus­try. The weak im­ple­men­ta­tion of In­tel­lec­tual Prop­erty Rights (IPR) in In­dia con­tin­ues to re­sult in coun­ter­feit prod­ucts pro­lif­er­at­ing. These pose un­healthy com­pe­ti­tion to most re­puted brands.

Out­look for 2017

With the Gov­ern­ment thrust on de­vel­op­ment of ru­ral and agri­cul­tural sec­tors, con­tin­ued in­vest­ment in in­fra­struc­ture projects, im­ple­men­ta­tion of GST and di­min­ish­ing neg­a­tive im­pacts of de­mon­eti­sa­tion are ex­pected to ac­cel­er­ate eco­nomic growth, and in-turn lead to spurt in de­mand. The com­pany’s long-term strat­egy to re­alise prof­itable and sus­tain­able growth rests on key ini­tia­tives like growth in high vol­ume busi­ness linked to au­to­mo­tive and offhigh­way in­dus­tries. In­vest­ments are ex­pected to be made in ap­pro­pri­ate tech­nol­ogy.

Keen to of­fer high value-added prod­ucts and ser­vices to­gether with con­tin­ued ex­pan­sion of com­pe­tent dis­tri­bu­tion chan­nel in a bid to en­sure long-tern suc­cess in the af­ter­mar­ket, the com­pany is also mak­ing reg­u­lar in­vest­ments to ex­pand its man­u­fac­tur­ing foot­print. It is also in­vest­ing in ta­lent and train­ing, and con­tin­ues to em­pha­sise on op­er­a­tional ex­cel­lence through Scha­ef­fler ini­tia­tives like ‘Move’ and ‘Fit for Qual­ity’.

A hy­brid roller bear­ing

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