Diversification paying, new segments form 26% of business: Greaves Cotton

Greaves Cotton, a 162-year old company that once focused on selling automotive diesel engines, has set up a non-bank financial company as part of diversification strategy begun four years ago, said a senior executive on Thursday.

New segments, like Non-Auto and E-Mobility, now contribute around 26 per cent. It does not include Greaves Finance, which is the most recent foray. 

“All of our businesses are beginning to grow in double-digits, except our auto engines business, which is obviously in direct correlation to the (three-wheeler) market, which is down 60 per cent. Even when one of our core businesses was down, our new businesses making up almost 26 per cent of revenue, and newer diversification areas, especially in areas of green shoots like e-mobility, retail, and financing, bodes well for our diversification strategy,” said Basavanhalli.

Greaves Cotton’s revenue in the third quarter of Financial Year 2020-21 was Rs 495 crore compared Rs 520 crore a year ago, indicating it was bouncing back after fighting the coronavirus pandemic’s impact on business. The company said all business verticals grew, except for the auto engines business, which dropped by around 56 per cent on the backdrop of decline in auto sales due to the pandemic. On the other side the non-auto engines grew by 44 per cent. The non-autos engines include marine, construction equipment, agriculture engines. The e-mobility products business grew by 26 per cent.

Greaves Cotton has in the last four years diversified into e-mobility, marine and defence engines manufacturing, construction equipment, sales of spares, third-party after-sales servicing of three-wheelers and financing as part its plan to position as ‘Diversified Conglomerate’ focusing on last mile connectivity, auto, non-auto, e-mobility, retail finance.

Business restructured into five focus areas – Automotive, Non-Automotive, E-Mobility, Retail and Finance. The company is planning to bring its auto engine business to 40 per cent in the near future which is around 50 per cent now.

As part of its consolidation plan, from the six plants it consolidated into one at Aurangabad. The company also started outsourcing a portion of manufacturing. Consolidation & overhead reduction will reduce the fixed cost by 10% in future, said Basavanhalli.

Greaves Cotton first acquired electric vehicle company Ampere in 2018, subsequently completing the acquisition in November 2019. The E-Mobility Business under Ampere Electric and offers a wide range of Ampere electric scooters (2-Wheelers) and ELE e-rickshaws (3-Wheelers).

The company added 80 plus outlets since unlock & Ampere e2W business touched a new milestone of 300 dealerships and 75000 customers. Recently, the company has signed an MoU with Tamil Nadu Government to set up a manufacturing facility at an investment of around Rs 700 crore. The facility will spread over 1.4 million square feet, will be one of the largest e-mobility manufacturing plants in the country.

It will have the potential to start manufacturing 100,000 units in its first year of operation, and has the potential to scale to 1 million units per annum.

Its retail network consists of 500 ‘Greaves Retail’, comprising two-wheelers- Ampere e-scooters, ELE electric 3-wheelers and Greaves Care (three-wheeler service workshops).