Sandvik Group sees more than 6% growth in India: CEO

Sandvik Group, the $12 billion diversified mining conglomerate from Sweden, is betting big on India’s growth story. The company caters to the demand for mining tools from the rest of the Asian countries from its five manufacturing bases in India.The group’s global president and CEO Olof Faxander spoke to DNA about the firm’s plans for India and the rest of Asia. Excerpts:

How is your topline divided between your different segments?
We have five business segments. Out of these, the mining and the machining solutions are the largest segments for us in terms of revenue as well as the number of employees. Construction is a very small segment as of now. All the business segments have different challenges. We are focusing on our core business sectors such as automotive, power, construction and mining, especially the mining segment wherein we expect companies will continue to invest heavily. Countries like India and China are going to register high growth. So to meet the challenge we are looking at ways and means to become cost-efficient to create a better supply chain.

Are you looking at organic growth or are there any plans of acquisitions?
Historically, we have grown through both organic as well as inorganic ways. We first look to grow organically, after which we look at acquisitions. In India we have not evolved any merger and acquisition strategy at the moment, but it is an interesting market for us and hence in future, if we find any interesting company that we can partner with or acquire, we will take a decision.

What is the biggest challenge that you face while operating in India?
We, as a company, have very high business ethics and we would like to incorporate the same ethics in our Indian operations. However, implementing the same corporate governance standards in your country is a challenge for us. Also, in India the bureaucratic process and the procedure to get investment approval, throw a big challenge at us. I think India will have to ensure that there is a suitable environment for making investments by the companies. Meeting this challenge would be the most crucial aspect for us to increase our investments in the country.

How much do you export from your manufacturing base in India?
India is an export hub for our company. Around 45% of the products that we manufacture here are exported to the rest of the Asian countries. We employ over 2,000 people in the country and will be hiring more in the coming years. India definitely has a cost advantage over China, as we are an engineering company and need to hire skilled labourers. Also, India has the advantage of an English speaking population, so it makes easy for us to export from India as compared to  China.

How is your growth chart in India and what is is the contribution of India in your global revenues?
India offers us a high growth trajectory because of the huge development that is taking place in the country. Till 2008 we were growing at 30% rate in the country, after which there was a little impact on our revenue but now we are back on track. In terms of India’s contribution to our global revenues, it is around 3%, but we expect that to go up significantly in the coming years.

Do you think the current economic situation will be a setback for your plans in India?
I don’t think so, because in India we are not expecting any recession. The growth numbers may come down but even then we will be looking at a minimum 6% growth which is higher than anywhere in the world other than China. So we have huge business opportunity in the country.

Construction equipment leasing companies have seen the utilisation of their fleet drop from 85% to almost 70%. Since you are a manufacturer, have you felt any impact on your sales?
The construction business is pretty good in India, especially with the government projects in the offing. We don’t see those indicators in India, but in China we are seeing the impact of the economic turmoil which is a very large market for the construction business.