Telangana issue scares Hinduja Foundries away from AP

M. Ramesh Chennai | Updated on March 12, 2018

Scraps plan to set up plant in Medak district

Hinduja Foundries Ltd, which had been planning to set up a greenfield castings factory near Toopran in the Medak district of Andhra Pradesh and had even bought land there, has dropped the idea because of the ‘Telangana problem'.

The company has instead decided to add capacity at its existing facility at Sriperumbudur, near Chennai.

Confirming this to Business Line, Hinduja Foundries' Managing Director, Mr B. Swaminathan, said that while Andhra Pradesh would have been an advantageous location in terms of relative proximity to customers in the Pune-Gurgaon belt, the ‘Telangana issue' has caused the company to revise its decision in favour of Tamil Nadu.

The Rs 550-crore Hinduja group company today has two plants in Tamil Nadu, at Ennore and Sriperumbudur (commissioned three years ago), and one in Hyderabad.

These plants can produce 146,000 tonnes of castings for automotive applications, mainly cylinder blocks and cylinder heads.

Demand for these products is soaring.

Last year, Hinduja Foundries produced 72,790 tonnes of castings, one-and-a-half times more than the previous year. But today, the company has orders for 140,000 tonnes and Mr Swaminathan reckons that it would be able to supply 120,000 tonnes – worth Rs 1,000 crore — which means the company's topline will double this year. (On Friday, the company's share closed at Rs 83.35 on the BSE.)

The burgeoning demand establishes the case for capacity expansion. Hinduja Foundries has announced a capex of Rs 70 crore, part of which will expand the Sriperumbudur capacity from 50,000 tonnes to 72,000 tonnes, taking the total capacity to 168,000 tonnes, by the end of the current financial year.

But going beyond, the company plans to raise capacity to 200,000 tonnes. This would call for an investment of around Rs 150 crore.

This could have happened in Andhra Pradesh, but the turmoil caused by protestors, who want a new State carved out of Andhra Pradesh, has made investors nervous.

For Hinduja Foundries, apart from proximity to customers, availability of cheaper power than Tamil Nadu was an attraction.

“The preferred State is Tamil Nadu for us,” says Mr Swaminathan, “as it is a very industry-friendly State.”

Asked about the shortage of power in Tamil Nadu, he said that he was confident that the situation would be remedied soon by the State Government.

Published on July 10, 2011

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