We can confidently say that we will continue to outgrow the industry. Transfer of technology helps. The fact that we are not dependent on a single market helps, Hemant Luthra, Chairman, Mahindra CIE, tells ET Now.
Edited excerpts:
Mahindra CIE has been delivering double digit growth despite slowing demand in EU and muted demand in the domestic market. What would you say is driving this kind of growth?
It is coming from the fact that customers have figured out there is a strong company. It has got a strong balance sheet. It is not going to go the way of the company that have taken on too much debt and therefore we see customers migrating to us and we see demand from all over the world and it is in Europe, India, everywhere the demand is still going up. Whether we would be able to grow 20% year on year, as we look forward for the next three-four years, I dont know but having delivered that kind of growth last year, we hope to continue at least in 2019.
What levers are you identifying for the outperformance over the industry to continue and how much of this do you think you would owe to the Bill Forge? What has been the contribution from there?
Bill Forge contributes a turnover of about Rs 800 crore on a total turnover of Rs 8,000 crore. So yes it makes an important contribution but I do not think it moves the needle and therefore I have to say that every bit of the business is performing well. We are growing in foundry, we are trying to double our capacity. We are growing in gears, we are trying to double our capacity. In stamping, we are putting in two new plants. We are spending about Rs 300-400 crore in capex and as I said, this is operating efficiencies. There are new customer orders and we continue to see a number of banks and OEMs coming to us and pointing to us that these are the guys who are weak and can you take them over because we want to grow this automotive business in India 10-12% year on year for the next 15 years.
They need to see well capitalised vendors. I can even give you some specific examples but I will hold off from that till we come to what you think about the M&A strategy.
How are you addressing the overall demand environment both globally as well as back home, given the multiple headwinds, trade war concerns, volatile fuel prices, currency, increased raw material costs and dampened consumer sentiment as well? Do you see these concerns spilling over into 2019 too?
We are not worried about 2019. We are not worried at all because we have gone and met the Marutis of the world which are sitting on $5 billion of cash and they think that that cash has to be spent if they need to grow from 1.5 million cars a year just now to 5 million cars a year by 2030. They need suppliers to spend not $5 billion but $10 billion. Now, most of the suppliers who over-borrowed are in NCLT.
They have all kinds of problems and Maruti needs a reliable supplier, as do other OEMs and the same thing is happening in different parts of Europe. That is why we can confidently say that we will continue to outgrow the industry. Transfer of technology helps. The fact that we are not dependent on a single market helps. The fact that no single customer is more than 15% of our turnover helps as well. The fact that we have got technology across forgings composites and everything helps and our new M&A targets are in those areas of technology and geography where customers are demanding our presence of a strong well capitalised company.
We are now looking at aluminium, plastics and we can see that the growth will continue.
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ET Markets
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