The Hindu Business Line : Sundram Fasteners to expand capacity — To leverage Malaysian unit to tap Asean market

SUNDRAM Fasteners Ltd plans to expand capacities at its plants in Chennai, Madurai, Pondicherry and Hosur. It also plans to leverage its subsidiary company in Malaysia to tap the Asean (Association of South East Asian Nations) market.

Mr Suresh Krishna, Chairman and Managing Director, Sundram Fasteners, told shareholders at the annual general meeting on Monday that the enhanced capacities at the four plants will be in place later this year. Last year, the company's performance would have been better but for the steep increase in steel prices and capacity constraints.

Sundram Fasteners would strengthen the Malaysian subsidiary, RBI Autoparts Sdn Bhd, by producing more products so that the plant became a "beachhead for the Asean region," he said.

Sundram Fasteners increased its stake in the Malaysian company to 70 per cent from 30 per cent last year. This company came into Sundram Fasteners' fold through TVS Autolec Ltd, which was merged with Sundram Fasteners last year.

Mr Krishna said the steep increase in steel prices continued to be a cause of concern for the company. It was trying to get its customers to increase their prices to the company.

"The company is becoming more and more aggressive in seeing that the steel price increases are fully compensated by the manufacturers (automobile manufacturers)," he said.

He said the company wanted to grow its exports to 50 per cent of sales over the next few years from the present 30 per cent. At present, exports sales were at Rs 20 crore per month against Rs 15 crore per month last year.

The amalgamation of TVS Autolec with Sundram Fasteners would help it in increasing exports. The Autolec division's exports alone would be about Rs 100 crore, a figure that had been reached in five years while it had taken Sundram Fasteners 15 years to reach an export turnover of Rs 100 crore.

Mr Krishna said that the company's operations were becoming more complex resulting in increased delivery costs. Its customers were no longer prepared to take on inventory, and, instead Sundram Fasteners had to deliver products two to three times a week and in some cases seven days a week. This was not just with export orders but also in the domestic market.

He told the shareholders that the plant put up by Sundram Fasteners in China and the acquisition of a plant in the UK would help it in expanding its customer base. Mr Krishna said that it was the "beginning of an epic tidal wave of outsourcing" that was going to come the way of Asia. In Asia, only two destinations - India and China - were equipped to tap this opportunity.

Responding to shareholders' queries, he said that manufacturing outsourcing by Japanese and Korean companies was a possibility but something that would happen only in the "distant future." "But we will keep them on our radar screen," he added.

He allayed apprehension about higher inventory costs last year stating that export orders required holding at least three months inventory. And, as exports increased, inventories would stack up disproportionately.

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