Looks at aerospace, defence sectors for growth
Kennametal India Ltd, an Indian subsidiary of US-based Kennametal Inc, a manufacturer of cutting tools and engineered components, is looking at aerospace, defence and energy sectors to increase its business in India.
The Rs 305 crore company, which presently derives 3 per cent (about Rs 10 crore) of its turnover from the aerospace sector, is set to increase it to double digits during the next two years.
“We are in talks with Spirit Aviation from the United States for the supply of cutting tools. Spirit has an arrangement with Bangalore-based Dynamatic Technologies for outsourcing of components like flap track beams for Airbus A320,” Santanoo Medhi, Managing Director, KIL, told Business Standard.
The company presently supplies cutting tools for machining exotic materials like titanium composites to Hindustan Aeronautics Ltd and TAL, a JV between the Tata Group and Boeing. Kennametal supplies cutting tools to TAL for machining parts for floor beams of the Boeing 787 Dreamliner. HAL uses its tools for making parts for Sukhoi and helicopters among others.
“The aerospace business was non-existent three years ago. But today, we have about 3 per cent of our sales from this sector. We hope to grow this to double digits in the next two years,” Medhi said.
Kennametal operates in three areas of metal forming, metal cutting and machine tools. Presently, cutting tools market in India is estimated at $200 million and growing at 15 per cent annually. Kennametal holds about 28 per cent of the market.
With the government of India set to open up FDI in defence sector to 74 per cent, Kennametal India hopes to increase its business further. “We expect to supply tools for Army tanks, armoured vehicles and guns. We expect the defence market to grow by at least 12-13 per cent year on year,” Medhi said.
Kennametal presently derives about 64 per cent of sales from the automotive sector and plans to reduce it to about 50 per cent in the next three to four years. The remaining 50 per cent will come from aerospace, defence and energy sectors, he said.
Kennametal’s clientele includes DRDO, Indian Army, Ordnance Factory, BHEL, L&T and Mitsubishi Heavy Industry among others.
“Aerospace is a nascent business in India. But we expect big growth there for us. Another biggest contributor will be energy sector.
More investments are set to happen in the power sector,” he said.
Presently, the energy sector contributes about 11 per cent of its business. It is growing faster than any other business for the company.
Recently, Kennametal invested $13 million (about Rs 55 crore) to set up a metal-cutting lab in Bangalore, which will be used to showcase and demonstrate its latest cutting tools. Kennametal’s R&D centre presently employs 27 engineers and it plans to hire another 35 engineers this year, Medhi said.
Kennametal India, which reported a 21.7 per cent drop in its sales to Rs 305 crore in 2008-09 due to slump in car production, expects to register over 10 per cent growth in 2009-10. At the end of April 2010, its third quarter, the turnover was Rs 264 crore, a growth of 10 per cent year-on-year.