The Hindu Business Line : FLSmidth to expand Chennai engg centre

Chennai, Sept. 26 “Look at those,” he says, pointing to a series of overhead projectors, as we climb the stairs to the first floor of FLSmidth’s well-ventilated office.

“We pull down those white screens and when we need to communicate something to our 2,500 employees, we just use this system,” says Mr Anders Bech, Managing Director and CEO, FLSmidth Pvt Ltd, the Indian subsidiary of the Danish engineering company that is a world leader in supplying engineering design and equipment to the cement and minerals sectors.

It is so much easier to do it this way, he adds. All the employees gather on the wide corridors. How often do they use the system? “Every three months. When I want to update them on the company’s performance, our targets and so on,” says Mr Bech, as he tells you that the company advanced its second phase of expansion from 2010 to 2008.

The whole office, he says, has been designed to encourage employees across divisions to communicate with each other better. The offices are all glass partitioned, giving a feeling of transparency.

Mr Bech’s office itself is spacious and tidy. Two statuettes, a painting and a replica of the wind turbine that is powering the office are the decorations in the room, whose wide glass window gives a clear view of the greenery outside.

Expansion plans

In 2004, FLSmidth of Denmark decided to expand the engineering hub in Chennai and the manufacturing hub in China, mainly to cut costs and counter the downturn in the cement and minerals sectors.

The Indian subsidiary acquired 6.5 acres and planned a first phase that would house about 1,500 employees. But even as it moved in to the new premises at Kelambakkam — about 30 km from Chennai, along the IT corridor — in the middle of 2007, the company realised that it would need to go ahead with the second phase much ahead of schedule. Some departments still worked out of the city office and hence FLSmidth completed the second phase this year, against the original plan of 2010.

The company now plans to construct the third phase, which will house another 1,000 engineers, once it obtains the requisite approvals. This building will have about 10,000 sqm of office space, in addition to the 26,000 sqm of office space that is being used now.

Strength in numbers

From about 300 employees in the cement business in 2004, when Mr Bech came to India, that number has increased six times to 1,800 now. It more or less mirrors the growth in new cement production capacity in both the Indian and the global markets. The Chennai office provides engineering for the Indian projects as well as 60 per cent of the engineering for global projects.

In India, according to Mr Bech, FLSmidth has around 45 per cent share of the equipment supplied to the cement industry. He measures the market share in terms of kiln capacity. For instance, of the 31 million tonnes of orders committed or letters of intent issued by cement companies in 2008 up to August, FLSmidth’s share will be close to 14 million tonnes. This capacity will go on stream in the next two-three years.

Supplier mix

FLSmidth carries out detailed engineering and supplies equipment for cement plants. Depending on the type of equipment, it is imported from Europe (hydraulic equipment, heavy duty gear boxes and heavy castings), China (coolers and burners from its own manufacturing centre) and the balance is sourced from nearly 200 vendors in India, to whom it supplies detailed designs.

On complaints from cement manufacturers that one of the reasons for the delay in capacity addition is due to problems in equipment supply, Mr Bech admits that it is an issue. It is basically because the industry was used to working at a certain capacity and now in the last three years, the cement industry has been adding huge capacities. The vendor base is just not there to cater to this growth, he says.

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