Tube Investments to look at expanding capacity in engineering business

The company will be looking at additional Rs 40-50 crore to debottleneck the existing capacity of the division prior to expansion

Tube Investments, part of Murugappa Group, is planning to expand its capacity for manufacturing of tubes under its engineering business, in order to meet its expectations to grow at 20-25% a year in this business.

The company will be investing around Rs 40-50 crore this year for which they would help it to meet the demands for a year, but will look at fresh investment in the segment later. Plans for a larger capex would be ready by the beginning of 2017, according to senior management officials.

Speaking to the analysts, L Ramkumar, managing director of Tube Investments of India (TII) Ltd, recently said that the company is going to do some debottlenecking quickly and will undergo expansion as well, to meet the demand. While the debottlenecking will carry for one year, in order to meet the growth of 20-25%, it need to a little higher level of investment, he said.

Every year the company spend around Rs 70-75 crore of capex in this business and the company expect to spend another Rs 40-50 crore, for debottlenecking.

"I think as we see this year and once we form up our exports and once we see how the momentum is going on in automotive, we have planned the next year, sometime in January we will have a firm view of next level of capex," he said.

The company, in 2014, has launched a large diameter plant in Tamil Nadu, to address the infrastructure market, such as hydraulic cylinders, propeller shafts and other large-diameter-tube applications.

The capacity utilisation of this facility is around 30-35%, and it is growing every month. However, the main business of products for automobile and others, the capacity utilisation could be close to 95-100%, he said. The company is also expecting its exports to grow, which would also require additional capacity.

The engineering business of TII include strips and precision tubes, electric resistance welded and cold drawn welded tubes, which are supplied to automotive companies in India and abroad. It also has market presence in power plants, boiler, textile machinery, general engineering among others. It has also added stainless steel tubes to its portfolio with manufacturing facility housed in Avadi, Chennai.

The growth in the engineering division has also been driven by the good growth in the automotive sector, in all the three sectors to which the company cater to the two wheeler, the passenger cars and commercial vehicles — during the first quarter. The company has tied up with some Original Equipment Manufacturers (OEMs) to supply the engineering products in Southeast Asia and Europe, in automotive segment, he added.