Exports climbed 90% this year, says SKF

AB Svenska Kullagerfabriken (SKF), based in Gothenburg, Sweden, is the world's largest manufacturer of bearings. In India, the company controls 30% of the bearings market. SKF India also makes seals and lubrication systems, among others.

For the three months ended June 30, SKF India's net sales rose 34% to about Rs505 crore and net profit jumped 174% to Rs48.5 crore. Shishir Joshipura, managing director of SKF India since last December, spoke to DNA about the drivers of the company's growth, uniqueness of the Indian market, and SKF's research & development plans. Excerpts from the interview:

You posted strong numbers in the three months ended June 30. Does this mean the auto and industrial segments are back to normalcy?

Yes. Auto has grown very well and industrial equally well but with a time lag compared to auto.

Do bearings still contribute 90% to your overall business?

Yes, almost.

You plan to bring down the share of bearings to 80%, right?

I would say we plan to increase the share of our other businesses so that they become 20% of our portfolio. There is no intention to reduce the share of bearings.

What is the idea behind that?

We want that much penetration for our other product lines. They have to grow at a much more rapid pace. Bearings have an established market whereas some other products are fairly new. There are technologies which the Indian market has not seen before. They are starting from a low base and we want to grow them so that the ratio changes.

Which sectors have bounced back strongly?

It's very broad-based. Cement, steel, power, they are all growing at more or less the same speed. Wind is the one which is now starting to come back but was the last kid on the block, so to speak.

How about auto?

That's quite broad-based too. Two-wheelers, cars, light commercial vehicles. They are all doing well.

What is the revenue split between auto and industrial?

Auto is 45%, industrial 45%, and exports the rest.

Will the ratio continue to be the same?

We don't know. It depends on how the sectors grow. There is no strategy to grow a particular sector.

What's your capex this fiscal?

Upwards of Rs100 crore, most of it on capacity expansion, some on modernisation and on safety.

What is the capacity utilisation at your facilities?

The Hardwar and Ahmedabad plants are new so they are still ramping up but our other facilities are quite full.

What is the size of your order book?

For industrial, it's about Rs350 crore. For auto, it's more forecasts and schedules from the auto OEMs.

How are exports doing?

Quite well. This year, they have grown about 90% over last year.

Has there been a reversal in payment delays you witnessed last year?

Yes. We have put in place some strong processes for payment management for customers and they have responded very well. Everyone has become more responsible after the downturn.

Do you undertake product development in India?

Yes, in Bangalore we have a testing centre and a small development centre for two-wheelers. We have just announced that we would build a global technology centre there which when finished will have a product development centre, a testing centre, and 400 engineers. But it will be housed in our unlisted sister company, SKF Technologies.

Are there any segments you cater to worldwide but not here yet?

There are still some industries which are just making inroads into India. Medical equipment is an example. And for some specialised bearings we might not have yet found a market in India, but then our conditions and requirements are different. In Europe, you have to have truck bearings that last a million miles. In India there is no such norm. Unless that kind of norms and sophistication come in, we won't be able to provide such bearings. For customers here, the first cost of ownership is important. That is, how much money I spend on day one, which is more important than the lifetime cost of ownership. It's an interplay of various things — policy, roads, vehicles and end-users.

How big is the unorganised bearings market in India?

They are about 25% of the market. There are about 100 manufacturers here. But it's nothing compared to China which has 2,000.

Do you see consolidation happening?

The market is currently big enough so there is space for everyone.

Do you see more and more products developed here for the Indian market?

We are definitely embarking on creating products demanded by the Indian market. Our roads are different, so are our driving habits and driving conditions. We don't have a 250 km/hour autobahn so I need to create products that will go through the Chandni Chowk traffic.