Sundram Fastener's Krishna: That oyster and world thing

Fastening The World
Growth, for Sundram Fasteners, has largely come from that other G word, Globalisation.

Sundram fasteners will definitely not figure in this listing next year. That's because the company will be a Rs 1,000 crore-plus enterprise then. It will probably figure in the listing of India's fastest growing large companies, however. For, although no one at the company will say anything about how big it will be by 2010, there's unanimity on one score: Sundram Fasteners will seize any opportunity to grow. There's no doubt that much of this growth will come from exports: these account for 30 per cent of revenues and the company is working on increasing the proportion to 50 per cent. The merger of TVS Autolec, an automobile pump manufacturer, with it has given Sundram Fasteners a broader product portfolio (given that it will be selling to the same customers, this is an obvious advantage). And a clutch of recent acquisitions and international forays has already made the company a global entity: in December 2003, it acquired Cramlington Precision Forge in the UK; in September 2004, Sundram Fasteners (Zhejiang) Ltd. opened for business in China; in February 2004, it increased its stake in RBI Autoparts SdnBhd, a Malyasian company, from 30 per cent to 70 per cent; and in November 2004, it set up a joint venture, Sundram Bleistahl, with German automobile valve train manufacturer Bleistahl (Sundram owns 74 per cent). The benefits are the same; as the company's Chairman and Managing Director Suresh Krishna puts it while explaining the advantages of the Cramlington acquisition, they allow Sundram Fasteners "to tap into newer marketing teritories for its existing manufacturing range".

-Nitya Varadarajan

The Right Switch
A booming market and some intelligent diversifications power Havell's India's growth.

Doing the right things: Anil Gupta (front), Joint Managing Director, Havell's India, with Ameet Gupta, Director

The secret of Havell's India's growth can be captured in one simple fact: by December 31, 2004, it had manufactured its last electrical meter. Reason? The high quality of Havell's meters was not recognised and most state electricity boards opted for less expensive (and poor quality) alternatives. It has been the ability to jettison businesses with no future rapidly, diversify into others that have better prospects as quickly (in 2003, for instance, it diversified into the manufacturing of fans, lights and compact fluorescent lamps, and expects these to contribute around Rs 400 crore to its revenues within the next two years), yet stick to its core strengths that transformed Havell's, a small switch manufacturer founded by Chairman Q.R. Gupta, an electrical products trader in 1983, into an end-to-end solutions company in India's now booming power distribution and electrical equipment industry (reasons: the upturn in construction; power sector reforms, and the like). "We have grown because we did the right things," gloats Anil Gupta, Joint Managing Director, Havell's India. "We aggressively built world-class quality and economies of scale to maintain our cost advantage." The company did this in the light of coming competition from foreign players in the early 1990s and discovered an adventitious benefit: exports. Today, it exports to over 45 countries.

-Supriya Shrinate

The Other Software Firm
How latecomer Hexaware learnt to live with the biggies in the IT services space, and thrive.

Hexaware's Nishar: After growth, governance is the new challenge

This magazine, and this writer, have written extensively on how small and mid-sized companies in the it services space are floundering. Hexaware Technologies has clearly bucked the trend: it grew by 61 per cent between January and December 2004 to cross Rs 545 crore in revenues. No, the company does not do anything very different from what the biggies do. What it has done is make a valiant (and in retrospect, successful) attempt at identifying underserved markets, shoring up capabilities to service identified markets and investing way beyond the industry average on business development. Reinventing the wheel does seem to pay off.

Hexaware was founded in 1991, but it was only in 2001, after promoter Atul Nishar sold his successful training business Aptech and merged that company's software business with the former, that things started happening. Around the same time, he hired Rusi Brij, then Executive Vice President of Satyam, based in New Jersey, as Vice Chairman and CEO. Brij wasted no time in involving the entire senior management in the transformation of a company that had clearly missed the bus and the huge it services growth wave that had characterised the 90s.

"In our first meeting as a team, Rusi asked, 'Why should Hexaware exist when we have TCS, Infosys and the rest of them?'", recollects P.K. Sridharan, President (India Operations).

The consequent emphasis on differentiation resulted in two findings: one, Germany was a vastly underserved market; and two, Hexaware's own capabilities were in the area of PeopleSoft (an enterprise software) implementation and support. Both seem to have paid off: today, Hexaware is the largest PeopleSoft partner among Indian it services firms and generates the largest share of revenue from Germany as compared to its peers and competitors. "Typically, smaller companies identify niches of operation and grow large enough within those niches to challenge existing players," says Saurabh Srivastava, Executive Chairman, Xansa Technologies. "This is what Infosys did to Accenture."

The company is confident that it will cross $1 billion (Rs 4,400 crore) in revenues over the next six years. "We have the potential to grow to half-a-billion dollars (Rs 2,200 crore) of revenue in the current market spaces in which we operate, but beyond that we need to incubate growth drivers," says Brij, adding that the company is looking at RFID (radio frequency identification) as one such.

The Hexaware story has several buyers. In a recent research report on the company, Edelweiss Capital gushes that large client wallet share, strong order flows from both the us and European geographies, and also the key verticals (BFSI, Airline) will allow the company to grow revenue and pat by 32 per cent and 82 per cent respectively in cy05 (calendar year). However, not all investors have forgotten Nishar's past. As one researcher with a brokerage puts it: "I wouldn't trust the promoters after their history with the non-banking finance company Apple Finance (where there was a big depositor default issue)." He goes on to qualify that Hexaware's 80 per cent net profit growth guidance for the year looks stretched. Hexaware's Chairman Nishar sticks to his profit guidance and brushes off the NBFC charge by saying, "I cannot be held responsible for the way industries pan out." Investors haven't had occasion to score Hexaware on governance yet, but when the time comes, it looks to be seen whether they rate it as high on that parameter as they do on growth.

-Priya Srinivasan

Nothing Middle-of-the-road About Growth

Monnet Ispat

The way Amitabh Sharma sees it, Citigroup got it right. The Vice President (Marketing) at Monnet Ispat is referring to the 14.5 per cent stake CVC International, a Citigroup company, acquired in his company for Rs 45 crore in June 2004. Since then (although there isn't a cause-and-effect relationship here), Monnet hasn't put a foot wrong. Net profit for the nine months ended December 31, 2004, is Rs 78 crore, up a whopping 205 per cent (2003-04 revenues Rs 263.1 crore; 2004-05 nine-month revenues, Rs 495.6 crore). Much of that can be attributed to a low-cost structure based on captive generation of power and mines the company owns in Chhattisgarh, close to its plant in Raigarh (the new plant at Raipur is close as well). Then, there's the spiralling cost of sponge iron, the company's product, that has helped: up to Rs 12,000 a tonne today, from Rs 5,000 in 2000).

-Supriya Shrinate

Kalyani Group Chairman Baba Kalyani: Betting on the sustainability of the steel cycle upturn

Kalyani Steels

To extract more growth from the current upturn in the steel cycle, Kalyani Steels (2003-04 revenues Rs 464.31 crore; 2004-05 nine-month revenues Rs 608.84 crore) is setting up a new facility of around 2.5-3 lakh tonnes in Hospet. That should almost treble capacity from the current 1.6 lakh tonnes a year. What if the cycle fizzles out? "The steel cycle upturn will last at least for a couple of years more," says C.G. Patankar, Executive Director, Kalyani Steels. That confidence is evident in the fact that Kalyani declared a dividend last year (2003-04) after a gap of four years.

-Narendra Nathan

Punjab Tractors

Even when the Indian tractor industries was floundering, Punjab Tractors was an outperformer. Now, with the industry on a high following a reasonably good monsoon, increased demand, and the ruling United Progressive Alliance's rural and agricultural emphasis, it shouldn't surprise anyone that the company is doing even better (2003-04 revenues Rs 597.3 crore; 2004-05 nine-month revenues Rs 622.7 crore). Net profit, for instance, is up 105 per cent in the nine months ended December 31, 2004, to Rs 41.8 crore. "Our volumes have increased due to good monsoons and introduction of new models," says A.K. Sawhney, Director (Marketing), PTL. "And a better product mix and cost control measures have helped in boosting the company's bottom line."

-Supriya Shrinate

Shree Precoated Steels

The story is the same: another steel company, growing rapidly, and in the midst of an exercise to double capacity (the project will be completed by September 2005) to milk the upturn in the steel cycle. That should explain why G.S. Lodha, GM (Finance), Shree Precoated Steels, expects "sales to double from Rs 522 crore in 2003-04 to over Rs 1,000 crore by 2005-06". With exports booming (around 70 per cent of its revenues comes from exports to the us and Europe), the increased capacity should, once Shree works off the effect of the capital expenditure, translate into fatter profits.

-Narendra Nathan

Nava Bharat's Prasad: Ores, or access to them is the next big frontier for the company

Nava Bharat Ferro Alloys

Every year since its founding in 1972, Nava Bharat (2003-04 revenues Rs 498.06 crore; 2004-05 nine-month revenues Rs 435.59 crore) has paid out dividends. Now on a roll with the upturn in the steel cycle, the company is working on containing its costs. "Power and ores together account for 80 per cent of our costs," says P.T. Vikram Prasad, ED, Nava Bharat, explaining that the company already generates its own power and that it is in the process of taking up mining of chrome ore. "For manganese ore, we are in the process of identifying strategic partners in South Africa and also exploring the option of entering into a long-term alliance with Australian or Brazilian suppliers," says Prasad.

-E. Kumar Sharma

Pantaloon's apparel manufacturing unit: Then there are its own retail stores that sell everything from greens to gold

Pantaloon Retail (#9 in last year's study)

"In the next five years, the share of organised retail will increase from 2 per cent to 10-15 per cent," says Kishore Biyani, Chairman, Pantaloon, who is confident that his company will be there to take advantage of this change. We think so too (which is why you see him on the cover of this issue of Business Today).

-Priya Srinivasan

Lakshmi Machine Works

The Coimbatore-based textile equipment manufacturer Lakshmi Machine Works or LMW (2003-04 revenues Rs 663.5 crore; 2004-05 nine-month revenues Rs 673.7 crore) grew rapidly in 2004, yet used a mere 50 per cent of its capacity. That will change in the coming years, reckons D. Jayavarthanavelu, Chairman and Managing Director, LMW, with the quota regime on textile exports coming to an end. "India's share in the global value-added apparel and textile market will increase from 3.6 per cent now to 7.6 per cent by 2010," he says. "LMW looks at the future as promising and at the same time, challenging." That's succinctly put.

-Nitya Varadarajan