This start-up is translating niche-products into profits.

By Ranju Sarkar

The closure of the trailer- manufacturing division of the Rs 47-crore Mahindra Engineering & Chemical Products (Mahindra Engineering)--a subsidiary of the Rs 3,025-crore utility vehicle and farm-equipment manufacturer, Mahindra & Mahindra (M&M)--in mid-1994 had an unusual fall-out. It provided the opportunity to four would-be entrepreneurs, two of whom were executives of the division, to test their entrepreneurial skills.

Convinced about the existence of a demand for trailers, the foursome--Raman Anand, 36, who moved to M&M just before the closure of the division; Kamal Khosla, 44, and D.K. Chopra, 52, who stayed on at Mahindra Engineering; and K. Rangaswamy, 56, who went to Raytheon Engineers as a design consultant--decided to carry on from where they had left off at Mahindra Engineering.

Learning from Mahindra Engineering's mistakes, they decided not to manufacture the mechanical trailers that account for 97 per cent of the trailer market but face stiff competition from the manufacturers in the unorganised sector. Instead, they chose to build technologically-superior, niche products: the super-heavy, modular, hydraulic trailers that are used for transporting heavy equipment.

That was a perfect strategy for the young entrepreneurs since M&M was, at that time, implementing a group-level restructuring exercise that resulted in the companies in the fold pruning all those activities that did not focus on their own--and the group's--core businesses. Out went the trailer division of Mahindra Engineering--and with it went their strongest potential competitor.

Says Anand: "When Mahindra Engineering stopped making trailers in 1994, we thought it was the best opportunity for us to make our mark." So, Khosla and Chopra quit Mahindra Engineering, and Anand joined them from M&M's Delhi office. They sounded out Rangaswamy, and the four promptly registered a company, Tratec Engineers (Tratec), on March 21, 1995.

Then, they went about raising finances from friends and relatives to contribute Rs 2.50 lakh each towards an equity base of Rs 10 lakh. Since Tratec could not afford a site in an industrial area, the promoters bought a three-acre plot of land at Bhondsi, on the Delhi-Alwar highway, for Rs 32 lakh. Even Anand's mother chipped in with a Rs 16-lakh loan after selling off a plot at NOIDA (Uttar Pradesh).

Soon, the opportunity they were waiting for appeared. In August, 1995, Raytheon's metal and mining division needed base plate castings for an aluminium mill that it was setting up in Bahrain. When the German company from which Raytheon used to procure the castings asked for a delivery-period of two years, Raytheon began scouting for other vendors. At this juncture, Rangaswamy--who is now based in Chicago, where he works for Raytheon--played his hand.

As Raytheon's design consultant, he had his contacts in the company. To them he introduced Tratec, which offered to supply the castings within 90 days. Thus, Tratec started its business with a Rs 10-lakh profit on the Rs 27-lakh order. Says Khosla: "Since we told Raytheon that the job could be done here, they gave us the order." It also enabled Tratec to post net profits of Rs 6.16 lakh on a turnover of Rs 43.72 lakh in 1995-96--its very first year of operations.

The next year, 1996-97, Tratec sold 22 axles, and earned net profits of Rs 11.22 lakh on a turnover of Rs 196.27 lakh. In the next three years, the company hopes to attain an annual sales level of Rs 5.78 crore. It is expanding its product range to include running gears (used for the transportation of LPG), car transporters, army trailers--Tratec has been empanelled as a vendor by the Union Defence Ministry for the last--and even self-propelled vehicles.

Peer at the company's chassis--and you'll discover the reasons for Tratec's success. Its products are cheaper than imported ones, the technology used is as good as those of the global majors, and the focus on hydraulic trailers in bulk transportation has opened up a niche. Says Suresh Kumar, 41, CEO, Suresh Kumar Transport: "Hydraulic trailers are safe because they provide equal load distribution."

Only five global majors--including Gold Hoffer and Scheuerle of Germany, and Cometto of Italy--manufacture modular hydraulic trailers. But Tratec is slowly making inroads into the domestic market for its products with a clientele that includes some of the biggest names in the country's transportation sector: Kataria Transport Services, Suresh Kumar Transport, and Central Roadlines. Tratec claims that its usp is price, with its technology and quality already at par with the global majors. "We sell our trailers at Rs 7.50 lakh per axle while the imported products cost between Rs 15 lakh and Rs 16 lakh per axle," says Khosla.

Until now, since imports have been costly, bulk-cargo transporters have been importing second-hand trailers and reconditioning them. Claims Vinod Kataria, 37, managing partner, Kataria Transport Service: "Second-hand trailers come cheaper even after paying the overhauling costs." Also, the company will have to cope with the fact that most transporters already have modular trailer fleets of 50 to 70 axles each, which are lying idle due to the slowdown in the economy.

Despite this, Tratec still hopes to corner the hydraulic trailers market, which is estimated to grow by 5 per cent per annum in future. Says Khosla: "Taking the latent demand into account, we are well-placed for the next two years. After that, we will have to look at the replacement market and exports." That would mean burning rubber at Tratec. But then, the trail that this cra(c)k Team leaves behind is always hot.