Tata Honeywell is buzzing again
By Roop Karnani

The juices are flowing once again at Tata Honeywell Ltd. (THL). After two years of relatively flat growth in 1996 to 1998, the Pune-based automation and control major is on the roll. Last year, its topline surged 21 per cent to Rs 279.2 crore and the bottomline to Rs 19.2 crore from Rs 11.11 crore the previous year. "This year, we should have similar growth," says a bullish Vinayak Deshpande, 42, CEO, THL.

A few things have helped Deshpande put the company back on track. For one, the restructuring of 1996. Until then, THL had two major divisions: marketing and projects. This was broken down into four strategic business units, each with its own profit motivation. Also, Applications Engineering, a core area of its strength, was centralised under one SBU. The rationale: under the old system, each project manager had some application engineers with him, and when the SBUs were formed, each SBU did its own application engineering. This wasn't working too well. So, the service was centralised under one SBU, giving it the critical mass to invest in tools like PRIMAVERA--a project management and schedule tracking software-and, thereby, increasing its efficiency and quality.

A year before the restructuring was put into motion, the company moved into the software side of the automation and control business. Until 1995, it was in basic process control--a level 1 business. But process control is only a part of automation and control. Beyond that there is production management control, a level 2 activity, and further up logistics control of an entire process control plant.

The moving up in value chain helped. From being a hardware provider of process control equipment that dealt with measurement and control of parameters like flow, temperature, and pressure, THL was now a provider of software solutions that helped decide product mix, logistics and supply chain management in a process plant.

Ergo, in 1995, a division called Hi-Spec Solutions was started. Within two years, it had bagged its first big order worth Rs 55 crore from Hindustan Petroleum Corporation for oil movement and storage. "This is the biggest ever order bagged by an Indian company for automation and control, and we just completed execution of the order three months ago," points out a proud Deshpande.

Hi-Spec Solutions has a suite of software solutions, which include balancing short-term demand for maximum profits with the long-term need for sustained asset capabilities through plant-wide data warehousing, production costing, yield accounting, and batch-tracking. The software offered by Hi-Spec solutions also integrates into ERP systems, such as SAP, to provide a profit-centric approach. "Earlier our marketing people would talk about flow and pressure to operators and a couple of years down the line they will be talking about profit and loss to the board of directors," says Deshpande

Indeed. "From the sensor to the boardroom", is the new sales pitch at Tata Honeywell. As more and more companies change their business models and adopt e-strategies, THL expects the demand for level 2 and level 3 products to grow exponentially.

Consolidating Gains
Meanwhile, the market size of the traditional process control hardware is Rs 750 crore and is growing annually at 15 per cent. "We have a 34 per cent market share, which is one-half more than that of our nearest competitor, Yokogawa," says G.M. Khanna, 51, Vice-President (Industrial Automation & Control), THL. Says J.P. Singh, 49, CEO, Yokogawa Blue Star: "We are often surprised at the extremely low prices quoted upfront by THL to win a job."

In the conventional process control products too, growth for THL could come from utilities such as power and water supply, and infrastructure like terminals, pipelines, ports and jetties. For instance, IOC has close to 500 terminals to distribute oil from, and not all are automated. Now it wants to automate all the terminals to increase the distribution efficiency. Says Harsh Chitale, 28, Chief (Corporate Strategy in Business Development), THL: "The competitive pressures are growing and that will encourage automation."

The company has already bagged the 1,200-km long, Jamnagar-to-Loni pipeline project worth Rs 20 crore. It is now targeting the Petronet pipelines, which are slated to come up soon. Meanwhile, Tata Electric and TOTAL, a French company, are setting up an LNG terminal in Mumbai, and the contract for the control and automation of this terminal has been given to THL.

Besides industrial automation and control, which forms three-fourths of its business, the company is into building control systems that provide comfort cooling and heating, apart from energy conservation systems for commercial complexes. This business is expected to grow rapidly. "Last year, the sales of this division grew 50 per cent from Rs 14 crore in the previous year to Rs 21 crore," says Kumar Kanetkar, 41, Vice-President, Building Control.

New Forays
Late last year, Allied Signal Corp. merged into Honeywell, creating a $25-billion conglomerate. As a result, THL is likely to venture into newer areas of business. Prior to the merger, most of Allied Signal's businesses had nothing in common with Honeywell, except aerospace. Allied Signal was into manufacture of specialty chemicals, polymers, process technology and automotive components. THL doesn't have expertise in any of these areas so these are ruled out.

But Allied Signal is also into manufacture of turbo generators and transformer material. Tata Honeywell may enter into sale and servicing of these two products. Turbo generators are small gensets that are used for 24-hour power supply to cinema halls, commercial and office complexes. The sale and service of these generators would be synergistic with THL's Building Control products, which are used for regulating comfort cooling, heating and lighting. Points out Chitale: "We'll enter these business areas only if we can add value. We do not want to be just another intermediary."

Early this year, THL launched a new range of electronic security systems for homes and commercial establishments. This was a part of its strategic plan to get into the emerging electronic security products market. Last year, the market size for such products was Rs 100 crore, but is believed to be growing at a rate of 30 per cent a year. "It's a fragmented industry with a lot of small players, the only big player being us", says Chitale.

One of the reasons that THL is getting into this area is because in the last eight months Honeywell world wide, acquired several companies in the electronic security business. Just three of these acquisitions--including Westinghouse Security Equipment, C&K, and Pittway Corporation--have given Honeywell 20 of the best brands. Honeywell now has a turnover of $2 billion in the security business alone, which makes it the largest in the world. Consequently, THL, which now has access to all these products, is positioning itself to become a leader in the security business in India. Says G.R. Ganapathy, 28, portfolio adviser, SSKI: "The company has been performing extremely well."

Deshpande's brief, then, is simple: To keep the juices flowing at THL.

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