 "Rohit Saboo, president & CEO, National Engineering Industries")
Bearings, the most important components of any equipment, are considered to be vital to keep the wheels of industrial development, and also the country’s economy, running. While the market for bearings is growing, it is also undergoing metamorphosis with demand for high-quality, specialty bearings (used in critical applications and new-age equipment) witnessing faster growth as industries, such as automotive, railways, energy, etc adopt modernisation strategy.
Supporting this growth is National Engineering Industries Limited (NEI), promoter of India’s largest bearing brand NBC and a part of CK Birla Group, with its vast range of bearings that cater to diverse applications in various industries such as automotive, industrial and railways. With an aim to double its sales turnover in the next 4 years, the company is shifting its focus area from standard bearings to new generation bearings having higher life and lesser friction.
In this freewheeling interview with Rakesh Rao, Rohit Saboo, president & CEO of NEI, elaborates more on the company growth plans, emerging developments in bearings sector and impact of Brexit on the Indian industry.
How has been the performance of National Engineering Industries in 2015-16? What are your targets for 2016-17?
NBC’s manufacturing prowess boasts of a vast range of bearings that cater to diverse applications in various industries such as automotive, industrial and railways. NBC is capable of developing bearings from 10 mm bore to 2,000 mm outer diameter, in over 1,000 sizes. We manufacture all types of ball bearings, taper roller bearings, double row angular contact (DRAC) bearings, cylindrical roller bearings, spherical roller bearings and special along with axle boxes for railway rolling stock.
This financial year, 2016-17, it closed its books at about Rs 1,750 crore. NBC is eyeing significant growth as it is expected to grow at a rate of about 15 percent over the next year.
In 2016-2017, one of our key focus areas is on shifting from standard bearings to new generation bearings which would be bearings with higher life and lesser friction.
How is your exports business performing? Will Brexit have an effect on exports?
We started our export journey with $ 5 million in 2009 and it has multiplied seven times over the last five years. Currently, exports make up 16 percent of the company’s total revenue. NBC exports to more than 23 countries and the distribution network is fast expanding. Worldwide demand for bearings which was $ 48 billion in 2007 grew at 6.4 percent to $ 66.2 billion in 2012 and is expected to increase eight percent per year to $ 95 billion in 2016. Leveraging on this trend, NBC too is poised to further increase its export focus. Leading customers from the US, Germany, Brazil, Japan, Australia and other countries have entrusted NBC with their critical product requirements.
Britain houses a few of our customers and Brexit will change the policies of Britain, so for a certain amount of time it will bring in volatility. Also, the UK is considered to be a bridge to entire Europe, so if it leaves the EU this would impact Indian companies and their appetite for expansion in the UK.
How is the bearing market in India and globally? Are you seeing rebound in demand for your products in 2016?
The bearing industry in India as well as globally is on positive growth trend. The future growth of bearings industry is expected to be led by industrial production as well as demand from automobile sector. The global demand for bearings is expected to reach around a 100 billion by 2018 and the demand for ball, roller and plain bearings is projected to rise 7.3 percent annually to a hundred billion by 2018. According to a new research on ‘India bearings market outlook to 2019’, the sector is expected to cross over $ 4 billion benchmark by 2019. The bearings market in India is very dynamic and competitive where machine & manpower play an integral role.
Elevation in heavy, general, automotive and other industries has transpired the growth of the bearings sector in India. The focus on renewable energy will further lead to the increased demand for bearings as wind and water turbines require heavy usage of bearings. The prominent steps taken by the government will further encourage the bearings manufacturing in India.
What are the challenges facing the manufacturing sector in India?
Skill gap and infrastructural shortcomings are the key challenges faced by the manufacturing industry in India. The lack of skilled training is a prime concern as people are not trained and companies are struggling to find skilled people and keep up the low productivity. The other major issue that challenges the growth is infrastructural shortcomings resulting in high supply chain management cost and thereby leading to inefficient, high cost and low quality manufacturing industries. Besides these, the other problems that exists are lack of focus on quality and innovation, and inconsistency of performance.
Government of India has undertaken Make in India campaign. Are you seeing the impact of this initiative on ground?
Make in India is a campaign that aims to provide global recognition to the Indian economy. The initiative aimed to turn India into a global manufacturing hub and increase the manufacturing sector’s contribution to India’s GDP. The sweeping new initiatives of the Indian government that supplemented the campaign included infrastructure development, policy reforms, power generation projects and skill development programs to build a sustainable ecosystem that will foster manufacturing not only for the domestic market but also for global exports.
Looking from the perspective that India is one of the fastest growing global economies and is the third largest country in the world in terms of purchasing power parity, there is a tremendous opportunity for the Indian automotive industry to rise to the occasion and contribute towards the Make in India initiative.
How has been the demand from railways, especially given the investment emphasis of the government on this sector?
NBC’s manufacturing prowess boasts of a vast range of bearings that cater to diverse applications in various industries such as automotive, industrial and railways. Further, the Make in India campaign has encouraged investment in railways making Indian Railways a commercially viable organisation. The encouragement of private sector participation has opened the floodgates of foreign direct investment (FDI) in the sector and that in turn can fill up the gap created by lack of funds. So, to sum it up, we foresee a very positive growth story for the railways in the days to come with the apt implementation of Make in India reforms.
NEI is committed to supply high axle load bearings for newly built freight corridor wagons. We have also developed LHB coach bearings for passenger coaches. All of this will surely improve our business alliance with the Indian Railways and take the relationship forward. We also have future plans of expanding and foraying into the international markets while we continue to be the biggest exporter of railway bearings from India.
Defence sector has been gaining increased traction in India from global (& Indian) manufacturers. Is National Engineering Industries Ltd eyeing to tap this opportunity?
With Make in India striking a chord with the audiences all the sectors are observing an upswing, including the defence sector. The sector is expected to witness a significant growth due to the initiatives taken by the government to manufacture defence equipment in India. With the increased FDI collaborations between foreign investors and Indian manufacturers, many companies are looking at manufacturing for the defence sector.
We already have a presence in defence sector vehicles. We are also evaluating all the other business opportunities, and eyeing them closely for our growth.
Couple of years ago, you had undertaken ISRO project to supply parts for shuttles or rockets. Post-ISRO project, have you been able to scale this business?
The ISRO project is a very special application. We are not trying to play with volumes here, they are not important. It is a strategic project for us, this is how we see our company moving forward. We are going to support ISRO for any future projects as well.
What are your expansion plans?
We are present in Automotive, Industrial and Railways segments and all these segments are growing in India so to sustain and increase our presence these segments we are continuously investing in capacity and technology and new products. We have a plan to double our sales turnover in next four years. We are a global player and 25 percent of our revenue comes from exports so we are planning to increase our footprint through M&A or green field projects. We have plans invest more than Rs 100 crore in the next 4 years.
