If there is any uptick, we are ready to move faster

Tube Investments of India (TII) is the flagship of the Rs.225-billion diversified business conglomerate Murugappa Group. The company’s businesses could be broadly categorised into bicycles and non-bicycles. Non-bicycle business is largely around automobile segment and a few other industries. TII is either no.1 or 2 in most of the business segments it operates. L. Ramkumar, Managing Director of TII, spoke to The Hindu about company’s focus areas and opportunities in bicycle business. Edited excerpts:

How did your company react to this phase of recession?

The growth in last two years was not as good as in the previous years. One of the major impacts of the slow down has been the inability to recover costs, affecting margins. Despite that, the overall emphasis was on consolidation and improvement of market share. We felt focus on market share means sustaining competitiveness. In each of our businesses, we are a significant player.Regardless of market scenario, we decided to keep our eyes on market share and whatever growth is possible within in the market we tried to get. So, market share protection was the primary agenda. We saw rise in share in chains and tubes, while we maintained in bicycles. We also embarked on operational excellence programme in 2012, and it was a major differentiator as there have been significant improvements in product quality, delivery etc.

Did slowdown force you to change your long-term strategy or re-look at business areas?

No, we didn’t change from long-term focus objective. We feel that there are certain things about India growth story that would not change. Of course, it may happen in 5 years or 7 years. While everybody was focusing on cost reduction, we decided that if we want to be a technology player, there needs be a focus on import substitution.

And, formation of Tsubamex JV was a result of that strategy. We are in tubes, fine blank components, strips and metal formed parts – These go to two- or four-wheelers directly or indirectly.

The key strategy was we looked at value add opportunities in all our businesses. Also, wherever we don’t have capabilities, we decided to hire and build to compete in the international market. So, that is also a major difference between past and now. All these should result in higher margins or at least protect our margins. Another area where we want to focus on aggressively is exports. We hope to grow this significantly in the coming years.

What is the rationale behind stronger export plans?

Our focus on operational efficiencies over the recent years has brought more consistency in quality and more awareness about real issues. So, the confidence level to face customers in export markets is much better. So, we would like increase the contribution of exports to total turnover. May be we would aim to double the share of exports in the next few years. Export focus is mainly driven by two factors – firstly, when you are a bigger player in the Indian market and more foreign players enter, we can grow only to a certain level and we can’t aspire for very big share. Secondly, it is also a good hedge to fight the foreign players here. If you can supply overseas, fighting them here will be effective. With Germans and Japanese setting their feet in Indian market in a big way, there is a need to up the quality levels, and that creates a platform to look at exports strongly. In chains, we got it right and export to many OEMs across geographies. In tubes, we need to improve. For bicycles, we are getting some orders.

How has the bicycle business been growing, and how is specials segment doing?

Bicycles were also impacted by slowdown. There are two major segments -- standard bicycles that are nothing but black and green, and specials, which comprise all other categories such as children, ladies, MTBs (mountain terrain bikes) etc. In specials, there are two major areas – mass premium and super premium. Mass premium bicycles, priced in the range of Rs.7000-15,000, is doing very well, and this segment accounts for 3.5-4 lakh units per annum in the overall 15-million bicycle market. Mass premium segment is growing by 10-15 per cent per annum. Super premium products are priced above Rs.15,000, and the market size of the same is estimated at 20,000 units a year. And, this is growing even faster at about 20 per cent. A major driver of our bicycle business is our robust retail presence.

How is your Montra brand of bicycles doing? Do you plan more brands in the segment?

Super premium bicycles, mostly imported, are bought majorly by the people who know very well about bicycles and their benefits. This segment has huge potential to grow if government promotes good infrastructure. While we tied-up with international brands such as Bianchi and Cannondale, we launched Indian version of super premium bicycle to reduce cost. Montra, an alloy bicycle designed and produced in India. Positioned in the entry-level of super premium category, it has been well-received. Last year, we couldn’t meet the full demand, and we are now in the process of beefing up the capacity. While Montra is a mother brand, we have variants under the same. We are trying to bring more variants under this for ladies as also in other categories.

What is the growth outlook over the medium term?

We expect all the three businesses to grow well. In tubes, we have significant share with automobile growth plus value addition focus.

Also, we are looking at exports. Chains also are fairly well-stabilised. We have had good growth and market share gains, and there is a momentum with auto segment. We see excellent opportunity for bicycle business particularly in the premium categories. May be this year will be a big year of consolidation and improvements after two challenging years.

There is a hope that new government would focus on economic growth. If there is any uptick, we are ready to move faster. So, our momentum is good. And, we intend to be more competitive.

>balachandar.g@thehindu.co.in

( This article was first published in >The Hindu on July 20, 2014 )

COMMENT NOW