In Conversation: On fast track growth
Oct 14 2016
G Soundararajan, vice chairman, CRI Group talks on the market opportunities and potential for the company going forward
From being a pump manufacturer the company has been on a diversification mode off late. What is driving you towards diversification?
Actually, this came out of our business development strategy, based on our new vision and mission statement. We were working on for last two years. We wanted to become a full-fledged ‘fluid management solutions’ provider. That opened new horizons for us. That is the reason why we moved into different segments and categories within pumps to cover a wider arena of industrial, mining, pharma, power, food & beverages and community water supply pumps, and also for chemical and machine tools (coolants) industries. We took over one company in the UK, which enabled us to enter mining and chemical segments.
Further, two years ago, we acquired an Italian to focus on waste water treatment solutions. Since fluid needs to be carried we entered into manufacturing of high-end pipes – the non-metallic segment. We have factories in Ahmedabad and Hosur. Then we entered into manufacturing cables and wires and we consume a lot of copper today. In fact, our distributors and dealers had a lot of opportunities. This prompted us to add to our cable and wire manufacturing and it is already a 10,000 tpa capacity for copper.
With a wider offering of products, we have set a target of Rs 5,000 crore by 2021. The Indian market size for cables and wires is estimated at around Rs 40,000 crore. Out of this, the segment where we have launched our products is estimated at Rs 14,000 crore and this is expected to grow to Rs 25,000 crore by 2021 and our aim is to have a 4-5 per cent share of that around that time. In the case of pipes, the Indian market size is around Rs 23,000 crore. Within that the segment, where we have launched two products, accounts for Rs 11,000 crore. We are planning to introduce more products and are targeting a 10 per cent share by 2021.
We are focused on four verticals – pumps, valves, pipes and wires & cables. Of the Rs 5,000 crore revenue target that we have set to achieve by 2021, around Rs 3,000 crore revenue will come from pumps and valves and another Rs 2,000 crore will come from wires & cables and pipes.
What made you to look at the waste water segment and how big is the opportunity?
It is a very interesting industry that we have entered and have a basket of products. We got the technology from the Italian company, which had complete range of products for waste water solutions. In urban areas in the country, most of waste water is untreated. About 73 per cent of municipal water supply becomes waste water and the existing capacity to treat such waste water is also very small. With more and more industrialization, Swacch Bharat, Clean Ganga and Smart Cities, the need for treatment solutions will only grow. In addition, industrial corridors too are set to come up and of course, industries too generate lot of waste water, especially chemical, F&B and leather. The cheapest way of addressing that is treating it. Both China and India are big markets for waste water treatment solutions and waste water treatment is going to be a big industry and offers a huge opportunity for companies.
We understand, the company is about to get a big order for agriculture pumps. Can you throw some light on that?
Yes, we are about to get it. Energy Efficient Services Ltd, a central government unit, has taken up a program to replace about 2.1 crore agricultural pumps with 5-star rated energy efficient pumps. It floated tenders for two states – Andhra Pradesh and Maharashtra for 2.5 lakh pumps to start with. Other states like Haryana, Punjab, Karnataka, Chattishgarh and Rajasthan are getting ready. If the targeted 2.1 crore pumps, which are in-efficient, are replaced with energy efficient pumps, the country can save around 30 per cent of energy. This will lead to an annual saving of an estimated Rs 40,000 crore.
In fact, CRI was the first company to associate for this program and successfully implemented a pilot project in Solapur district of Maharashtra. The pilot project covered about 19 villages. We even established a new plant for manufacturing such energy efficient pumps. We delivered around 2,200 pumps for the pilot project and we realized a 30 per cent savings in energy on account of this replacement. Based on the success of the pilot project, the Union Ministry of Power has taken it up seriously and pushing for the early implementation of the program across the country. The tender for Andhra Pradesh has been opened and it is for 1.5 lakh pumps and we are L1 and have given our commitment. In this, we will be major supplier, though I will not be in a position to reveal the actual numbers that we supply - now. The supplies will start within two months. The pumps are being given free of cost to the farmers. If the country replaces the entire 2.1 crore pumps, the cost involved is Rs 70,000 crore. But, considering the annual energy savings cost to the tune of Rs 40,000 crore, it is a huge win-win situation for all.
Solar pumps are another area of focus and we are empanelled in MNRE for solar water pumps. We are doing a lot of work on this front in Africa, which offers a big opportunity for us.
A couple of years back, CRI entered the Chinese market with own subsidiary. How has been the experience so far - in terms of growth and CRI establishing a market presence?
Our China expansion has been good and our manufacturing operations has started. Surprisingly, there is a good image for Indian products there. We focus only on high-end products like industrial pumps and pressure booster pumps. It also offers a good opportunity for our waste water treatment solutions. We are growing good and doing well over there. China being a big market, it will take time to establish and strengthen our presence, but we are positive about China opportunity.
How big is your overseas basket, in terms of potential and present revenue? What will be share of domestic & overseas revenues by 2021?
At present, our exports contribute 17 – 18 per cent of our overall turnover, which is expected to be around Rs 2,000 crore for fiscal 2016-17. In the first quarter, we have grown by 41 per cent. By 2021, I expect the international business to grow higher and to be on par with our domestic business. We are present in 120 countries and have manufacturing as well as assembly facilities in China, Turkey and South Africa. We are doing well in Africa, Middle East and Europe. The global market for pumps is estimated at $42 billion opportunity. That’s a huge market. India’s contribution to that is still very, very small. Hence, there is a vast opportunity for growth from India and Indian exports.