In Conversation: Future looks bright
Sep 09 2016
NK Minda spoke to FC on the group’s growth plans and the latest consolidation move to chart higher growth going forward
What is the rationale behind having so many entities under the Uno Minda Group when the focus of almost all entities seems to be on the auto ancillary segment?
The first joint venture that we established was in the year 1995 with Tokairika, Japan, which was a subsidiary of Toyota Group. It was a great success and we developed a good rapport with the Japanese partner. After the economic reforms, the norms were changing for the industry, with product quality becoming the key. When more Japanese companies wanted to establish their units in India, our first JV partner recommended us to these firms as a good and reliable partner. That’s how it spread. With the success of Maruti Suzuki and the economic reforms, we saw big growth opportunity for the automobile industry in the country and expected global companies to come to India for manufacturing. We have been focusing on auto components after building a solid base through our first joint venture. As more and more partners joined hands, we really grew well.
Are you really able to keep a track of the developments in all these entities with the same focus, especially since there are too many JVs with Japanese and other companies?
We have distributed the whole business under various product lines and there are specialists who keep track of the technological changes and developments in the global automotive sector and in India. This helps us to plan well and stay ahead. In fact, the whole organisation’s structure is aligned with multiple products, which one can call as domains. A CEO, who is accountable for profit and growth, heads each domain. They are the functional and operational heads and hence we are able to easily handle multiple products and partnerships.
Even your flagship listed entity Minda Industries seems to be having so many operations under its belt. Was it really planned that way?
Even though our operations are fragmented through multiple joint ventures and many companies, we are now in the middle of a consolidation process. We initiated the process last year and it continued even this year. It will take another 12-18 months for the process to complete. If one looks at the legal structure of the company, each joint venture was formed for a particular product and a particular segment. In this process, some of the investments were made outside Minda Industries. The joint ventures are now becoming either subsidiaries or associate companies, depending on Minda’s equity stake in each one of them.
What is the idea behind engaging KPMG?
The main objective is to consolidate all auto component businesses under a single entity to bring efficiency in a cost effective manner, while protecting the interest of minority shareholders. All these consolidations have to be in line with corporate governance and at the same time adhere to various compliances as per the Companies Act. KPMG has been advising us at each stage of the process and has been suggesting us the right approach on a case-to-case basis. The first phase is already completed, which includes MJ Casting, where our stake has been increased from 50 per cent to 98 per cent; PTMA to 51 per cent; Minda TG to 51 per cent; Sam Global to 51 per cent and Kosei Minda to 30 per cent. In Roki Minda, the transfer of 49 per cent stake is currently underway.
The latest quarter results indicate that growth has come more through consolidation process than real organic growth. Your comments?
We have been posting good numbers on growth side both at standalone and consolidated levels. At the consolidated level, the growth has been 44 per cent, largely on account of group consolidation exercise. The organic growth has been in the range of 15-20 per cent. Growth of the company is correlated with growth of the sector. In the first quarter of this financial year, the sector grew by 9 per cent. We have always delivered a growth of 1.5-2 times of the sector’s growth rate. We target to achieve the same in the near future also. In fact, growth from now on will be higher on account of consolidation.
The company seems to be overtly dependent on the OEM segment, while ignoring the opportunities available in the replacement market…
It is not like that. All our products are not going to after market. But, there are some that are delivered for the after market. Different companies have different approaches in the way they want to grow. We are predominantly an OEM player. Over the last 4-5 years, we have added new products and that is why our growth is higher in OEM, even though we are growing well in after market too. We are not ignoring the after market. We have a separate company for after market and all group products are retailed through this company. We have established a network of 800 major dealers and have 10,000 touch points, which include 5,000 smaller dealers and retailers and around 5,000 mechanics.
While talking about after market, one factor we need to consider is that the product’s life depends on its quality. Thanks to the good quality and reliability of our products by way of accessing better technology and processes, their life has gone up significantly.
Can you throw some light on your plans for overseas markets, including acquisitions and expansions?
Three years back, we acquired a company in Spain – Clarton Horns, a technology leader in electronic horn. Couple of months back, we completed another global acquisition of Spain-based Rinder Group. The group is very selective in its acquisitions and technology. Expansion of geographical footprint will be an important consideration for future acquisitions. We are setting up a Greenfield plant in Mexico, which itself is going to be a big market opportunity for us. In addition, we can start supplying to North American markets. We will look for in-organic growth opportunities in associated product lines and not in new product lines, since it demands different learning. Any acquisition should not only add to the top line but also have synergies with the existing products and customers. We are selective as far as expansion is concerned. However, we understand the need of our customers and make appropriate investments closer to them. These investments are done as per our group norms.