Sona Koyo Steering Systems, the makers of steering wheels has had a tough year due to strike at Maruti Suzuki as well as the slowdown in petrol car industry. The company’s vice-chairman and managing director spoke to Saahil Anant on the path of increasing profitability and entry into new business verticals.

Excerpts:

Sona Koyo’s main customer Maruti Suzuki faced a long strike during last year. How has that affected your revenue growth targets for 2011-12?

We are going to see pretty much of a flat year in terms of revenue with may be minor growth, but not more than that. October was the most difficult month due to strike at Maruti Suzuki. Siam has gone from 12-14 per cent growth projections to about 2 per cent. Even though Maruti Suzuki saw a decline, we did see some amount of increase from Mahindra & Mahindra and Hyundai Motor that has levelled it off. However, car manufacturers are very positive on what comes next and they see good growth in future.

With revival in demand for cars, when do you see the company seeing increase in profitability?

That (decline in profits) was because we made investments of about Rs 80 to Rs 100 crore in capacity and people. If you look at our people cost as percentage of sales, it has gone up because of new projects. We are in the process of starting commercial production for our pressure die-casting project as well as in-sourcing project. Earlier, we used to outsource all our machining work, but now that will be done in-house. We had planned capacity expansion at the beginning of the year expecting 12 to 15 per cent growth. So we will see all these things together giving us different numbers and making our business a lot more profitable. By end of the financial year, we should be in a good place.

What next for Sona Koyo that has been in automobiles components business for over 25 years?

We are supplying to most passenger car manufacturers but now we are looking aggressively at new verticals, such as components for farm equipment and off-highway vehicles. We will expand in these new areas as well as within the auto component industry as a whole. At present we don’t have technology for commercial vehicles but we will definitely look at it. We have not examined two-wheelers at all, but if it makes business sense, we will look at it. We are also looking at diversification. We will look at engineering and manufacturing except components but there’s nothing finalised.

What do you think are the causes for labour strikes especially in Gurgaon-Manesar belt that dented country’s image?

The population and demographics of the country have changed. Managing young people or new people in the old style doesn’t work and that has really been the cause of labour unrest. But I think that realisation has come about and I don’t see major problems going forward. The opportunity to set up an automotive component business in different states also has come about because the number of automotive hubs has increased with new destinations such Gujarat, Pune and Bangalore. I don’t see it as a long-term phenomenon. However, talent is going to be our biggest challenge going forward.

Vehicles in US and Europe run on Indian automobile spares. How do you view this?

There is no difference in the quality of a product that you would get in Germany, the US or in India. We have had strong technology partnerships since inception with Japanese companies. We even had people who have come here from other high-precision industries and said that our factories are among top manufacturing plants that they had ever seen. Indian automotive component makers are now at par with any other country in the world.

saahilanant@mydigitalfc.com