Mr. Nishant Arya, Executive Director, Jay Bharat Maruti Ltd. and Executive Director on Board on various group companies that includes Jay Bharat Maruti Ltd. JBM group is India’s largest sheet metal component manufacturer and supplies more than 700,000 auto components & assemblies every day, today almost every vehicle in India is a JBM vehicle. A graduate of London School of Economics in Business Development & Strategy, he also has a bachelors’ degree in Business Administration from Bradford University, U.K with specialization in finance and marketing. The group’s turnover grew from Rs 15bn in 2006 to Rs 33bn in 2009-10. His vision is to take the company’s turnover to Rs 100bn by 2015. Mr. Arya expanded the business by actively looking at diversification. He planned various technical collaborations and joint venture with foreign companies including buyouts. He identified new business opportunities in areas like multilevel car parking, transportation, waste management, solar energy and ethanol. He was pivotal in getting new projects from different companies.
Jay Bharat Maruti Ltd. (JBML) is the manufacturer and major supplier of sheet metal components, assemblies and sub-assemblies, Fuel Neck Fillers, Axles and Exhaust systems primarily to Maruti Suzuki India Ltd. JBML was incorporated in 1987 as a Joint Venture with Maruti Suzuki India Ltd. (MSIL). The company is poised to achieve a turnover of Rs 10bn in 2010-11. The world-class manufacturing capabilities in its three plants in Gurgaon region include imported and indigenous press lines, robotic welding lines as well as plating and painting facilities. JBML added capabilities to produce exhaust systems, axles and fuel neck fillers to the existing capabilities of sheet metal components and welded modules.
In an exclusive interaction with Hemant P. Maradia and Anurag More of IIFL, Mr. Arya says, “Every year we are witnessing a growth rate of 20-25% in the company’s turnover and the JBM group is growing at about 30-35%.”
Could you explain the faster growth in bottomline compared to revenues?
Yes there has been very high growth in net profit because our operational efficiency has gone up and we are focused on improving the overall productivity of the company. The plant & equipment have been used on a three shift basis.
Also, volumes of our main customer i.e. Maruti Suzuki have increased sharply over the last 12 months. We are growing in line with Maruti. Therefore, we managed to clock such high growth in the profit for Q3 FY11. Our company has been able to control costs as well, such as power cost, administrative cost, etc.
But, raw material prices have gone up in recent times
Yes, raw material costs have gone up recently; otherwise the percentage growth in net profit would have been more than 100%.
Do you see this kind of momentum continuing going ahead?
Yes, we feel that the current momentum will continue and Jay Bharat Maruti as a company will grow at a fast pace.
In this financial year, Jay Bharat Maruti will be crossing the Rs 10bn turnover milestone.
What is the internal target for next fiscal?
Saying anything about the next fiscal year would be a bit difficult right now. But i can talk about this fiscal year. Every year we are witnessing a growth rate of 20-25% in the company’s turnover and the JBM group is growing at about 30-35%. The JBM group will touch US$1bn mark in terms of turnover.
Can you elaborate on volume of Maruti which has gone up?
Maruti is doing very well. This fiscal year, they had targeted volume of 1.2mn vehicles but they have increased that up to 1.25mn vehicles. They may even go higher than that. In the nine-month period ended December 31, 2010, Maruti’s volume stood at 9.25 lakhs vehicles as against 7.4 lakh vehicles in the same period last year.
Maruti is doing well; all their new models are witnessing good traction.
So, you expect Maruti to keep growing in coming quarters too?
Yes, growth will be there in the next quarter as well. We are also optimistic that in the next fiscal year also, Maruti will do exceedingly well. Jay Bharat Maruti will also grow in line with the growth in Maruti.
Don’t you think your growth is faster than Maruti’s?
It is all about product mix. So in our case, models for which we are supplying parts have done really well. Though we are supplying parts for every single model of Maruti we are increasingly focusing on the premium-priced models.
We supply 80,000-90,000 parts to Maruti per day and we are supplying them sheet metal parts, assemblies, exhaust systems, axles, fuel fillers, etc. to Maruti.
Jay Bharat Maruti has three facilities currently and one more facility will come up soon for Maruti’s proposed new plant at Manesar. We have set side an investment of Rs 2bn for the new plant.
Are you focusing more on higher end products?
Definitely, we are focusing on technology in a big way. We are trying to provide Maruti with the best quality and best technology products. That is one of the main reasons why we have been able to grow so fast with a customer like Maruti.
Off late there have been concerns over petrol price hikes, rising interest rates and higher prices of vehicles.
There could be a small impact, but currently the requirement for parts from Maruti is very high. There is a long waiting period for a lot of Maruti vehicles due to shortage of parts supply. The waiting period may go away but the sales would remain quite high.
Market sentiment is pretty good and Maruti is ready to invest.
Basically, you don’t see any challenges?
No. Not at all. We are completely committed to Maruti and growth will remain robust.
Are you working on any new product category for Maruti?
Currently we are focusing on the current product lines only. There is no plan as of now for making new products.
Are you facing cost pressures?
Yes, we certainly are facing a few cost pressures on the raw materials side and in other operational costs. In today’s scenario whether it is raw materials or other operational heads, costs are going up. So as a company we are very careful and watchful. We try to
optimise the expenses as much as possible. But there are certain expenses that we have to incur and we recover the same with our focus on cost efficiency and effectiveness in our products.
Would you say you have the pricing power?
In our case, the customer supports us in negotiating the prices with the raw material suppliers. Therefore, any increase or decrease in raw material prices is passed on to the customers.
What kind of margins do you enjoy right now? Will you be able to maintain double digit margins?
In the October to December quarter, our EBITDA margins were around 10% and we are confident of maintaining double digit margins. We may even be able to push it a little bit higher.
What would be the major challenges going ahead?
Major challenges for us will be supporting the customers and attaining the sales target, apart from operational efficiency and increasing capacity in line with customers’ requirements.
We intend to focus on Quality, Cost, Delivery and Development.
How will you fund Rs 2bn for the new facility?
We are raising it through internal accruals and partly through debt also. We have tied up all the debt already with banks.
Which are the other customers you have?
We cater to every vehicle manufacturer in the country, be it for two wheelers, three wheelers, passenger vehicles, commercial vehicles, construction equipment, mining equipment or farming equipment.
In passenger vehicles who are your clients?
We have Ford, Honda, Fiat, Tata Motors, M&M and Hyundai.
What type of parts you are supplying to them?
Sheet metal parts, assemblies, axles, etc. We are also supplying fuel tanks to a few customers. We supply wheel parts to for construction equipment and two-wheelers. We supply complete wheel assembly.
What are your expectations from the budget?
I think it’s too early to comment on the budget, but since the Indian economy is doing very well, the Government should be favorable for the industry.
Do you have any diversification plans?
We are working on plans to diversify into new product categories in the same segment. We have diversified into the car parking system. We have diversified into special purpose vehicles, where we manufacturer tippers, tailors, etc. We are also into weight management and we are also entering into education and engineering and design services.