The Hindu Business Line : In the business of machine tools

As the interface between the manufacturer and the user, they would not only be able to understand customer requirements better, but would also be in a position to spawn other business opportunities.

QUALITY CONTROL: S. Soundara Rajan and P. Sudhir, promoters of Excel Enterprises, check tool holders at their factory. - S. SIVA SARAVANAN

For the Coimbatore-based technocrats _ S. Soundara Rajan and P. Sudhir _ who manage a Rs 20-crore business in vending cutting tools and other machining devices, deciding many years ago, to start their own business was the easy part. Doing `what' seemed the million-dollar question.

How they went about identifying an opportunity may well make an interesting case study in strategic management.

They were clear that the new business should draw upon their work experience, which meant getting into some business involving cutting tools, for they were until then working for a machine tool company.

They also knew that a customer buying a machine tool was in the market looking for the appropriate cutting tool (required for machining a piece) without which the machine tool that they were buying would be of no practical value.

Positioning the business

It was an area where the small entrepreneur intending to purchase machinery had little help from the machine tool vendor. Neither were the typical hardware dealers or `mill stores' suppliers of cutting tools of much help.

Why not then advise machine tools purchasers about the kind of tools they would need for the machining jobs they had on hand, and also supply the same, they reasoned. Excel Enterprises was thus born.

By positioning themselves as solution providers (in machining) they set themselves apart from the multitude of hardware vendors who could supply any cutting tool as long as the customer knew exactly what he wanted.

This interface between the manufacturer and the user segment helped the duo understand the customer requirements better and could spawn other business opportunities, they thought. Not content to remain just distributors of cutting tools, they also forayed into manufacture of allied products for machine tools.

"We took to manufacturing tool kits/tool holders under the `Falcon' brand. The sale of the tool kit or tool holder became complementary to our initial line of business. It was a challenge to our engineering skill as the manufacture of tool holders/tool kits requires precision and skill. The dimension of the holder on which the tool sits should be perfect," Rajan explained.

They began the manufacture of tool kits in 2001 and have since come a long way.

According to Rajan, the `Falcon' brand CNC tool kit has a near monopoly in the market, particularly for new machines in the Coimbatore region today.

Excel Enterprises, the parent company, is engaged in the distribution of `Sandvik Coromant' cutting tools, BAHCO branded `Snap-on' products and work holding equipments for GMT, the Chennai-based manufacturer of Machine Chucks. The manufacturing arm, Falcon Toolings, which commenced operations with just one conventional lathe, has 25 machines today, including 16 CNC machines.

The company, according to Sudhir has been growing at over 30 per cent year-on-year. "We have managed to penetrate the US market as well. Our export volume in the last two years was about 30 per cent of our total turnover. It is more value growth rather than volume. We expect the group's turnover to cross the Rs 20-crore mark this year."

The company manages to participate in every trade fair, be it domestic or international. "We have to reach out globally," Rajan said. It marked its presence at the last fair at Hannover in Germany.

Growth plans

The company has drawn up ambitious growth plans. It is aiming to double its turnover and enhance its exposure in the markets abroad. "We supply components to original equipment manufacturers (OEMs)," Rajan said.

With Excel having managed to establish a name for itself, Rajan should be a satisfied man. But he has one regret. He is disappointed that financial institutions are not very supportive.

"We have been maintaining proper records and working profitably. Yet, bankers are reluctant to support us. They have demanded a 150 per cent collateral security. We have offered to put up a collateral of Rs 3.3 crore for an exposure of Rs 2.2 crore. We are not seeking incentives, only support, which at present is only marginal," he said.

The company had initially availed of assistance from a nationalised bank, but was compelled to shift to another bank.

"One is no better than the other," Rajan said.

"The recent hike in interest rates has also made borrowings unaffordable. Our PLR is 14 per cent. At this rate, we are seriously contemplating the need for a full expansion now," Rajan said.

Excel, meanwhile, plans to expand its reach by setting up offices in Ahmedabad, Ludhiana and New Delhi soon. It currently has offices in Coimbatore, Chennai, Pune, Jamshedpur and Bangalore.

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