Financial Daily from THE HINDU group of publications
Saturday, Apr 24, 2004
Shanthi Gears orders cross Rs 100-cr mark
Coimbatore , April 23
NOTWITHSTANDING the steep increase in steel prices, there appears to be some buoyancy on the industrial front. A look at the order book of the industrial gear manufacturing major, Shanthi Gears, will confirm this trend.
For the city-based Shanthi Gears, it was a landmark achievement when the order booking position crossed the Rs 100-crore mark during the just ended fiscal. Company sources attribute this pick-up to the increased activity in the business of gears.
``If industrial activity continues to grow, the demand for industrial gears will also rise. The growth though will not be in isolation," Mr P.K.R. Kurup, Senior Vice-President, Shanthi Gears, told Business Line.
The booking register shows that orders worth Rs 103 crore had been booked between April 2003 and March 2004. Mr Kurup is confident of clinching at least 25 to 30 per cent more orders if the buoyancy continued during the current financial year on the industrial front.
About 15 per cent of the total bookings pertained to project orders, on which the company has received advance, which varied between 15 per cent and 20 per cent of the order cost. The rest were from original equipment manufacturers (OEMs). No advance was taken on OEM supplies.
Stating the company could no longer afford to absorb the unprecedented rise in the price of input, particularly steel, Mr Kurup hinted at a rate revision. He said that the steel prices rose by 60 per cent in 2002-03, and by another 74 per cent in the first quarter of 2004. "There is a 134 per cent rise in the price of steel across the board," he added.
When asked if the present trend would compel the company to go slow on production, he said, "We can neither stop production nor hold back orders. There is hectic competition in the market place today. It is customer-driven. Product pricing is very crucial. But yes, we intend to explain this to our customers and are hoping that they will agree to a revision in the rate."
``Generally, the rates are fixed at the time of booking of the order. Because of this upward swing, we are unable to get the price we want," Mr Kurup added.
On the turnover, he said the company had surpassed the projected sales of Rs 83 crore to touch a mark above Rs 85 crore at the end of March 2004, compared to the Rs 56.30 crore achieved in the earlier fiscal. The exports accounted for just over 3 per cent of the total turnover. There would be more thrust on exports in the coming years, Mr Kurup said and pointed out that foreign buyers had started to explore the potential of sourcing the products from India.
When asked if there was any substitute for steel in the making of industrial gears, he said that gears could be made of wood, plastic, rubber and nylon, but none of these could be substituted for steel in power transmission, in high power application.
``For motion - yes, but there is no material to substitute steel for transmitting high power."
According to him, there was hectic activity in the steel, infrastructure and construction (lift and elevator) sectors, where the requirement for industrial gears was also huge.
The lack of availability of steel was yet another issue that the consuming sector had to contend with, Mr Kurup added.
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