Rohit Saboo, President & CEO, National Engineering Industries (NEI), talks about the challenges of the market he operates in
B&E: Last year, the Indian automobile industry performed below expectations. This had a negative impact on the growth prospects of the auto components sector as well. How did you offset the decline?
Rohit Saboo (RS): We are present across the board – ball bearing, roller bearing, et al. Except for the four-wheeler industry all other industries are doing fairly well. Although growth rates are lower than last year, they are still not that bad. While the commercial vehicles segment is growing at 13%, two-wheelers is growing at 19%. This year we too have grown 17% compared to 30% last year. But this is still better than the industry growth rate. We are focusing a lot on exports to get better growth rates so that we can utilise our total manufacturing capacity. We are trying to tap Daimler, BMW, and Ford for the same.
B&E: As a manufacturer of bearings, rolled rings and other such products, how would you describe the challenges of the market you operate in?
RS: The biggest challenge of the market we are present in lies in its uncertainty. About 42% of our turnover comes from the automobile sector and 18% from the aftermarket and half of that 18% again comes from automobiles. So overall around 50% of our turnover comes from the automobile sector, which is a very cyclical industry. If the economy is good our business also does well. If growth slips, our revenues take a hit. So we have to balance and manage this cycle very well. We plan to invest over Rs.5 billion over the next five years. But this investment will have to match the business cycle. Because if the relationship between the investment and the business cycle is not in sync, and if we invest in the wrong cycle then we will face a loss. The next challenge that we have is that most of our clients are going for higher technology items and better products at the cheapest rate. So we have to gear ourselves up to meet the market requirements. That is why we are investing a lot in our R&D so that we have better products at a lower cost.
B&E: Last year, the Indian automobile industry performed below expectations. This had a negative impact on the growth prospects of the auto components sector as well. How did you offset the decline?
Rohit Saboo (RS): We are present across the board – ball bearing, roller bearing, et al. Except for the four-wheeler industry all other industries are doing fairly well. Although growth rates are lower than last year, they are still not that bad. While the commercial vehicles segment is growing at 13%, two-wheelers is growing at 19%. This year we too have grown 17% compared to 30% last year. But this is still better than the industry growth rate. We are focusing a lot on exports to get better growth rates so that we can utilise our total manufacturing capacity. We are trying to tap Daimler, BMW, and Ford for the same.
B&E: As a manufacturer of bearings, rolled rings and other such products, how would you describe the challenges of the market you operate in?
RS: The biggest challenge of the market we are present in lies in its uncertainty. About 42% of our turnover comes from the automobile sector and 18% from the aftermarket and half of that 18% again comes from automobiles. So overall around 50% of our turnover comes from the automobile sector, which is a very cyclical industry. If the economy is good our business also does well. If growth slips, our revenues take a hit. So we have to balance and manage this cycle very well. We plan to invest over Rs.5 billion over the next five years. But this investment will have to match the business cycle. Because if the relationship between the investment and the business cycle is not in sync, and if we invest in the wrong cycle then we will face a loss. The next challenge that we have is that most of our clients are going for higher technology items and better products at the cheapest rate. So we have to gear ourselves up to meet the market requirements. That is why we are investing a lot in our R&D so that we have better products at a lower cost.
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