"We are al­ready prac­tic­ing ‘Make in In­dia’ for the last 30 years!"

R Do­raiswamy Man­ag­ing Di­rec­tor, Salzer Elec­tron­ics Ltd

Dalal Street Investment Journal - - COMMUNICATION FEATURE -

Salzer is one of the most com­pet­i­tive global man­u­fac­tur­ers of ad­vanced elec­tri­cal prod­ucts. How do you man­age to main­tain this cov­eted po­si­tion in the mar­ket?

Thanks for the com­pli­ment. The lead­er­ship for the last 30 years is the re­sult of the two point phi­los­o­phy adopted by the com­pany.

First is, we be­gin with cus­tomers. All the prod­ucts we de­velop are as per cus­tomer needs and hence there is al­ways a good de­mand for our prod­ucts. Our mar­ket­ing and de­sign team closely co-or­di­nate with cus­tomer and end users be­fore de­vel­op­ing any new prod­uct.

Se­cond is ver­ti­cal in­te­gra­tion. Nearly 70 to 80 % of the parts that go in­toany of our prod­ucts are made in-house. The re­quired R&D, tool­ing, mould­ing, man­u­fac­tur­ing andtest­ing fa­cil­i­ties are in-house.

This gives com­pet­i­tive edge over oth­ers, like flex­i­bil­ity in de­sign, qual­ity con­trol on the en­tire value chain, cost con­trol of the prod­uct, quick in­tro­duc­tion of new prod­ucts, etc.

What is your out­look on in­dus­try growth and eco­nomic growth in the com­ing years?

We are ex­pect­ing the switchgear in­dus­try to grow in the next 3 to 5 years at about 7 to 8%. Cus­tomers pre­fer sin­gle source, hence con­sol­i­da­tion or bas­ket of­fer­ing will grow.

With GST im­ple­men­ta­tion, we ex­pect all the or­gan­ised play­ers to get level play­ing field. Any­body can sell any­where in In­dia. No forms, no lo­gis­tic has­sles. We ex­pect to see the ben­e­fits of GST in the se­cond half of FY17-18.

The econ­omy is ex­pected to ac­cel­er­ate as well. The gov­ern­ment in­vest­ments will be sup­ported with pri­vate in­vest­ments, though not yet started. In­fra­struc­ture, wa­ter man­age­ment (like com­bin­ing of rivers, a multi-bil­lion dol­lar pro­ject ex­pected to be an­nounced soon), hous­ing and elec­tric­ity for all and de­fence will be the growth driv­ers

What per­cent­age of your sales do you in­vest in R&D?

Around 1.5-2% of sales is in­vested in R&D ev­ery year.

How is 'Make in In­dia' ini­tia­tive help­ing your com­pany grow?

As we said above, ver­ti­cal in­te­gra­tion is our strength.

Also, Salzer be­lieves in de­vel­op­ing af­ford­able prod­ucts lo­cally to re­place im­ports. We think we are al­ready prac­tic­ing ‘Make in In­dia’ for the last 30 years!

Many large multi­na­tional OEMS are look­ing at In­dia as a man­u­fac­tur­ing hub and look­ing for good sup­pli­ers to source prod­ucts for in­ter­na­tional mar­kets. This has al­ready started to trans­form into busi­ness for us as well as for var­i­ous other com­pa­nies. ‘Make In In­dia’ as a pol­icy should en­sure that the ease of do­ing busi­ness in In­dia is get­ting bet­ter year-on-year. This will bring in more com­pa­nies and thereby tech­nol­ogy into the coun­try.

What steps are be­ing taken to en­hance EBITDA mar­gin by 100 bps and to bring ROCE to around 18% in three years?

The com­pany’s pol­icy is to see that the ROCE is in­creased year-on-year. For this, EBIDTA mar­gins have to im­prove. Al­ready we have a mix of prod­ucts where some of them give us 14-15% mar­gin and some of them like wires &ca­bles give 7-8% EBIDTA mar­gins. On blended ba­sis, we see the com­pany’s EBIDTA mar­gins be­tween 10–12% de­pend­ing on the rev­enue mix be­tween th­ese two prod­ucts mix.

We have ini­ti­ated var­i­ous steps to in­crease EBIDTA,SUCH as:

- Cost re­duc­tion through value engi­neer­ing.

- Process im­prove­ment in var­i­ous fac­to­ries

– con­tin­u­ous process.

- Grow­ing high mar­gin busi­ness faster by in­tro­duc­ing new tech­nol­ogy prod­ucts.

What is your prod­uct-mix strat­egy that you think will op­ti­mise rev­enues for Salzer?

New Prod­uct In­dex (NPI),I.E, the sale from new prod­ucts as a per­cent­age of to­tal sales is the new fi­nan­cial pa­ram­e­ter adopted by Salzer. New prod­uct means those which are launched in the last 4 years.

We are aim­ing for 25%-30% NPI ev­ery year.

Also we operate in four user ver­ti­cals, namely, switchgear, mag­net­ics, build­ing and cop­per. Our prod­uct mix from th­ese four ver­ti­cles is such that the rev­enue and prof­itabil­ity as a group is main­tained as per tar­get. Also 21% of our sales are ex­ported.

We are al­ways look­ing at grow­ing the more prof­itable busi­ness. We also as a pol­icy en­sure that the cus­tomer mix, prod­uct mix, re­gion mix is very widely spread, so that any im­pact on any one seg­ment or re­gion does not af­fect the com­pany largely.

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