Srivats Ram, Managing Director, Wheels India Ltd.

India Infoline News Service | Mumbai |

“We are planning Rs700mn of capex.”

Srivats Ram, Managing Director, Wheels India Ltd. is a B.E. (Mech.), M.S. (Prod. Engg.). He has over 30 years of experience in the Vehicle and Component Industry. He is the immediate past President of The Automotive Component Manufacturers Association of India (ACMA).. He served as Joint Managing Director of Wheels India Limited since May 1, 2005. He has been a Director of Axles India Ltd since June 2006.
Wheels India, promoted by the TVS Group, was started in the early 60's. The company is a global source of Steel Wheels for Commercial Vehicles, Passenger Cars, Utility Vehicles, Agriculture Tractors and Construction Equipments. The company supplies two thirds of the domestic market requirement and has over 30customers globally. Wheels India posted revenues of Rs.956cr for the first half of the year with Net Profit more than doubling to over Rs.18cr.
Replying to Anil Mascarenhas of IIFL, Srivats Ram says, “We are planning Rs700mn of capex.”
By when do you see some revival in the automotive market? What are some of the developments at Wheels India?
The automotive wheel industry is increasingly moving on to global platforms amongst the MNC vehicle manufacturers and light-weighting across the industry. While the automotive market has been sluggish in the year to date, it is likely to revive in the next calendar year.
Wheels India is also a supplier to the off-road industries – agricultural tractors where there is increased mechanization at the farm level leading to strong demand for tractors, and the construction and mining industry worldwide where in particular energy requirements in India and China will drive mining of thermal coal, and the requirement of mining trucks thereof.
Wheels India is the leading manufacturer of air suspension systems for buses in the country. While government funding of bus programs through the JNNURM scheme has come down significantly, we believe that there will be increased adoption of air suspension systems not only on buses but also some specific segments of trucks and trailer in the country.
In terms of process, design and development of steel passenger car wheels, could you cite any significant changes in recent years?
The specifications and quality requirements have tightened as India is becoming an export hub for small cars. There is also increased focus on light-weighting the product.
Are you seeing underutilization of capacity given the slowdown seen in the economy?
While the automotive market has slowed down, we believe that it will revive in the next calendar year. While, there may be temporary under-utilization of capacity, we believe that the automotive industry will see double digit growth over the medium term.
The rising interest rates have been dampening sentiment regarding vehicle purchases. Are you seeing an impact?
There is definitely an impact of the successive interest rate hikes and this is dampening industry demand in both the car and truck industry.
Brief us on your latest numbers. What is the outlook?
In H1FY12, Wheels India saw a 19% growth in top line to Rs.9.56bn, and profits have more than doubled to Rs.109.8mn, off a low base. We have seen exports grow by 30% in H1 and we expect exports to remain strong in the second half of the year. At the same time, we expect some revival of the domestic automotive – car & truck markets in the last quarter.
You entered into a technical agreement with Topy Industries. Tell us more about it.
Wheels India has entered into a technical agreement with Topy Industries, a leading Japanese Wheel manufacturer for five years. The technology agreement covers process, product design and development. The agreement will ensure that we get involved through Topy in early stages of development for global platforms especially for Asian vehicle manufacturers.
Comment on your exports. Which are the markets you are looking at? Which segments contribute largely to your exports?
Wheels India is a leading manufacturer of construction and mining wheels to the construction and mining industry worldwide, servicing major OEMs in the industry and exporting wheels to six continents. We see the demand for mining trucks wheels in particular increasing especially given the demand for thermal coal from Indian and China and the need for mining trucks to evacuate this. We also service manufacturers in India who are exporting mining trucks in a large way.
Give us a revenue break-up from various segments and what is your market share in each?
A third of our revenue comes from wheels for the commercial vehicle segment, 22% from the passenger car segment, 20% from the agricultural tractor segment, 15% from the construction equipment and mining industry, 5% from air suspension systems. We have a just over 50% market share in the commercial vehicle segment, 43% market share in the passenger car segment and 61% in the agricultural tractors segment in India. In the mining and construction wheel segment worldwide, we have close to a 20% market share.
What is your capex for the coming two years? How would they be funded?
We continue to look at managing capex within the cash profits of the company. In line with this in the current year, we are planning Rs700mn of capex.
Tell us about your manufacturing plants. What is the capacity and utilization?
We have manufacturing plants at Padi, Pune, Rampur, Bawal, Sriperumbudur, Pantnagar and Wardha. We have a capacity to manufacture 13 million wheels and expect to make 12 million wheels in the current fiscal.
You plan to enter into manufacturing of air-suspension for truck and trailers. What is the size of this market and what scope do you see for this being an entrant at this stage?
The market for air suspension systems for trucks and trailers is yet to be fully developed. By being an early entrant in the market we believe we can leverage our service set-up to build a first mover advantage.
You are also diversifying into power sector. Give us more details. By when will you break-even?
We are currently making structural components for the thermal power plant manufacturers at our Wardha plant. We expect to break even in Q4 of this year.
What is the vision of your company?
We expect to build on our market leadership in each of the segments we are in and attempt to grow the company ahead of the market through adjacent diversification. While we will focus on growth, our aim is to improve our performance as well.
What is the shareholding pattern?
The TVS Group holds approximately 50% of the company, with Titan Europe holding 36% and 14% is with the public.
What is your staff strength? Your message to anyone wishing to join your company?
We currently employ over 2,000 people in our plants. The company is going through an exciting period building on fifty years of market leadership in our industry segment while at the same time exploring adjacent areas that could effectively utilize our inherent capabilities. There are tremendous opportunities to learn and grow with the company.
What is your message to shareholders?
We believe that while there is a slowdown in the industry at the moment, your company is poised to ensure improved performance through its diversified customer base and industry coverage. We are also building on our technical capabilities that should provide us with a competitive advantage as we move forward.

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