In Conversation: NBC scores high on quality

Rohit Saboo, president & CEO, NEI talks on the company's performance and future plans

<b>In Conversation:</b> NBC scores high on quality
National Engineering Industries Ltd (NEI) is the flagship company of the CK Birla Group. Though it was founded in 1946 as National Bearing Company Ltd and started its manufacturing with an initial capacity of 30,000 bearings per annum, it was re-christened as National Engineering Industries Ltd in 1958, while retaining its original trade mark, NBC. NEI today has four manufacturing plants in India and rolls out one crore bearings a month for several industries, especially for automobiles and railways in the domestic market. Over the past few years, the company focused its attention on the export market too and today exports to around 30 countries, including mainly the US, Germany and South Africa. Rohit Saboo, president & CEO, NEI spoke to Financial Chronicle on the company’s performance and future plans. Excerpts:

NBC has been a popular brand of bearings for decades. Can you throw some light on your present manufacturing capacities? Any plans for diversification?

As far as products are concerned, our primary focus has always been on bearings and we offer complete solutions. We are focusing our R&D efforts to continuously improve the performance of our bearings, especially with the emergence of electric vehicles and for other industries at large, besides automobiles, two-wheelers and railways.

We started our manufacturing way back in 1950 with a plant in Jaipur, followed by another in Newai, also in Rajasthan. Our third and fourth plants are coming up at Manesar in Haryana and at Savli near Baroda in Gujarat respectively. The Phase II expansion of the Savli plant is currently on and will be completed in the next two years. At present, we have a manufacturing capacity of about one crore bearings of all sizes per month. Once the Savli expansion is completed, by 2018 and its capacity is fully utilised, the manufacturing will increase to 1.3–1.4 crore per month.

Despite NBC’s presence for decades, the larger expanded growth would have come over the last two decades, thanks to economic reforms and automobiles. Has it?

In fact, a majority of our growth has come only in the last decade. Though automobiles remain the largest bearing consuming industry as such, about 40 per cent of our capacity goes into other industries as a whole, including railways and power plants. Of course, about 60 per cent of our capacity goes into automobiles. In the last 10 years, not only has the whole bearing industry grown consistently, but we have also outgrown the market by achieving double that growth. While the industry grew on an average by 8-9 per cent CAGR over the last decade, our company has grown by 16 per cent during that period. One main reason for our consistent higher growth than the market is that we listen to our customers and make products that suit their needs.

Further, for the last 6-7 years, we have increased our R&D spending due to which our speed to deliver products that suit the customer needs has increased. We have reduced the time taken to convert customer requirement into actual products and the rollout happens much faster now. In the domestic market, about 60 per cent of our output goes to automobile industry, about 30 per cent to railways and 10 per cent to other industries. We make anything from small bearings to very large ones that weigh 500–700 kg to industries. Since, anything that rotates, needs a bearing, we cater to motors, fans, washing machines, conveyors and transportation, material handling as well as industries such as steel and power plants. For the past eight years, we have also been focusing our attention on exports, where we have been growing by 100–110 per cent year-on-year for the past five years. That too has helped us grow better than the industry.

What triggered NBC’s export focus and how is it panning out?

We have been growing consistently in India and will continue to do that in the years to come. But whatever be the size the domestic market opportunity will always be limited when compared with global opportunity. So we thought that if we add exports to our basket, we can perhaps grow better and bigger. It all started when some of Maruti’s customers and a few others from the US and Germany audited us. That helped us in getting other global customers recognise us. While the recognition helped us to gain entry into exports, we continue to add more customers with every passing year. It is a huge market out there and we are trying to expand more and more. The biggest share of our exports are to the US, followed by Germany and South Africa respectively, besides Brazil and the SAARC countries too. Now, we are exporting to about 30 countries, with Saudi Arabia, Nigeria and Peru offering new opportunities for us in the recent times. Of our total exports, 60 per cent goes just to the US, Germany and South Africa. We are also trying to develop Russia as a market. In fact, we are looking at Europe much more seriously for OEM supplies and also South America for after market. We are adopting different strategies for different markets and our maximum focus will be in these two areas. We will continue to focus on the US too, which is a huge market by itself and offers immense scope for growth.

Even in the case of exports, around 60 per cent goes for automobiles and 40 per cent for railways. Last year, we did about Rs 320 crore worth of exports, which accounted for 21–22 per cent of our overall revenues. I think, our focus on technological development, investment in R&D and the technical skill sets that our employees have acquired has helped us achieve this growth in the export market. While customers were satisfied with the technical knowledge that our employees displayed in their initial interactions with them, they were completely assured of our quality delivery capabilities after they visited our plants.

Every industry and company in India talks about the China impact. What has been the case with your company?

Cheaper imports are always a problem. Nearly 80–90 per cent of bearing imports into India come from China. It is not just from traders, but lots of our competitors too have joint ventures and plants in China and they are also bringing them into India. We are countering it by improving the quality of our bearings and bringing down the costs continuously through R&D efforts. In terms of initial cost, the Chinese imports will be cheaper and our products will seem to be higher priced. But, when one considers the quality and the long-term life cycle of the products, NBC surely scores well here. The industry at large and our customers have understood this very well.

The after-sales market is one key opportunity for NBC products. Can you elaborate on it?

We have one of the biggest network of dealers and stockists in the country. Today, we have over 15,000 stockists all over India. After market sales account for approximately 14–15 per cent of our turnover and we have a well established distribution channel. But, spurious bearings are a major issue affecting the after market sales, with low quality imported ones too adding to the problem. We recently developed an App to help customers assert — whether what they are buying is an original or a spurious item. We are the first in India, and probably in the world too, to offer such a solution and that is helping us strengthen our presence in the market.

Renewable energy like wind source is a big opportunity. Do you see a potential for bearings, especially with higher capacity rotors and turbines coming into play?

The wind power industry was growing well until 5-6 years ago and a lot of capacity was added. However, it is a very high-end technology segment. We are not looking at developing bearings for big turbines yet. But, rotor and blade movement bearings are under development.

govardand@mydigitalfc.com

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