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Tuesday, Feb 03, 2004

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Machine tools sector too goes for outsourcing

Amit Mitra

Mumbai , Feb. 2

THE outsourcing bug appears to be biting into new business sectors in the country. First it was the software sector, which was quickly followed by the pharma and clinical research sectors. And now, the latest to hitch a ride with the outsourcing gravy train, appears to be the Rs 1,200-crore machine tools industry.

The logic behind the increasing flow of outsourcing contracts into India is the same — MNCs and foreign corporate houses are looking for outsourcing services that involved more labour, which would enable them to focus on other hi-tech areas.

Like in the case of software and pharma sectors, the global machine tools manufacturers are viewing India as a potential destination for outsourcing their production of low-end tools, especially with the domestic industry beginning to come into international focus, after it recently uncorked its `Made in India' brand campaign.

This was evident by the response to the seven-day Indian Machine Tool Exhibition (IMTEX) that was flagged off in Mumbai on January 28 — about 530 foreign companies from 26 countries are participating in the event.

The outsourcing trend started recently, with a few major players in the private sector, such as ACE and Batliboi Machine Tools bagging a few outsourcing orders from different companies. While ACE got a significant order from Japan, the Rs 200-crore Baltiboi had recently signed agreements with two European companies for supply of certain machine tools.

"The first is a two-year contract with an European country for supply of radial drilling machines worth about Rs 4 crore, while the second is with an Italian company for the supply of CNC bed-type drilling machines used in the dye and mould industries. We are discussing similar deals with other companies. Clearly, I see a huge opportunity for Indian machine tools manufacturers for getting outsourcing orders," Mr Nirmal Bhogilal, Managing Director of Batliboi Ltd, told Business Line.

That the Indian machine tools industry is attracting global majors was indicated by the response from the Switzerland machine tool industry, which is among the world's 10 major machine tools exporting countries, at the IMTEX-2000.

"Switzerland, which exported machine tools worth $215 million in the first three quarters of 2003, is finding it necessary to look at potential partners in countries like India that have hi-tech and cost-effective manufacturing capabilities to maintain and consolidate its global market presence," said Mr David Syz, State Secretary for Economic Affairs, who visited IMTEX 2004. He called for greater collaboration between Indian and Swiss companies that extended beyond buyer-seller meets to include joint exploration of machine tool markets in South-East Asia and China and outsourcing by Swiss companies to Indian machine tool manufacturers.

Another encouraging feature has been the entry of the Indian industry in China, which imported machine tools worth $3 billion in 2002.

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