Sundaram Fasteners to go ahead with capex plan despite auto sector downturn

Manufacturing sector veteran and Sundram Fasteners chairman Suresh Krishna said that the company is not shying away from investments since it wants to be ready when economy and auto sector bounce back

Sundram Fasteners is going ahead with capex plans, confident that the sector is promising despited a slowdown. Besides, to address cyclical challenges, the company has started expanding in new segments like defence and aerospace.

Sundram Fasteners chairman Suresh Krishna said that the company is not shying away from investments since it wants to be ready when the economy and the auto sector bounce back. 

The auto industry is known for its cyclical nature, the last one being in 2008. Since then, its has had a good run.

"At some point, downturn will happen; we can't expect to keep growing. A good company should manage both good and bad turns," he said while addressing the company's share holders at Chennai.

The company invested around Rs 440 crore in 2018-19 and plans to invest around Rs 350 crore in 2019-20. 

Arathi Krishna, managing director, Sundram Fasteners said that one of the reasons the company was not affected as much as others in the space was because it diversified into areas like retail and exports -- both account for around 45 per cent of company's sales now.

While domestic sales of the company dropped to Rs 557.22 crore during the quarter ended June 30, 2019 (Q1) from Rs 614.29 crore in the year ago period, exports grew to Rs 348.28 crore from Rs 321.71 crore, correspondingly.

Earlier, SFL floated a wholly-owned subsidiary named Sunfast TVS Ltd to tap opportunities in the defence and aerospace sector and Krishna is confident that the new company would clock around Rs 100 crore over the next two years.

Sundram Fasteners is not just a fastener company any more, but a broad-based engineering company capable of undertaking manufacturing of various components and assembly systems for automotive and other engineering applications in India and abroad, said Krishna.

Today, of its around Rs 4,002 crore revenue, only 30-35 per cent comes from fasteners.