Jaisankar Unnithan, Joint Managing Director, Sankar Sealing Systems, on the eve of Delhi Auto Expo 2012 speaks exclusively to Automotive Horizon Editor, Jayashankar Menon.
Excerpts of the interview.
What is your take on the forthcoming Auto Expo and what you are planning to showcase at the event?
In Auto Expo 2012, we are trying to repeat the success what we had in 2008 as well as 2010 editions. The 2008 Auto Expo was focused on export and 2010 Auto Expo was focused at expanding the OEM business. During Auto Expo 2012, we are looking at expanding our aftermarket business in India. The domestic aftermarket is going to be focused in addition to expanding our key customer base, especially in some high technology products.
So, you have come a full circle from the previous editions to the current Auto Expo....
Yes, I think we have now going through 360 degree cirle one that.
The latest happening in Sankar Sealing is the new joint venture you had signed with the Japanese firm, to develop gaskets for two-wheelers. Can you throw more light on that?
Yes, we are working with Japan Metal Gaskets for the motorcycle gasket activity in India. Japan Metal Gaskets is one of the pioneers of gasket technology globally. We are very happy to announce this particular activity for the two-wheeler segment. On the four-wheelers and six-wheelers, we are working with the Japanese firm, JP Gaskets and we have forged joint venture activity. It is a greenfield operation, starting up in Sriperumbudur, near Chennai. This is going to cater to a very different technology requirement of the OEM customers, especially for the Euro-V and beyond.
Will this include the commercial vehicles?
Yes, this includes the whole range of engines right from stationery engines up to passenger cars and commercial vehicles.
Now that Daimler has come up here in Chennai and DAF is entering the Indian market, what kind of potential you see in the fortunes of your business?
As you know, the peak pressures in the engines, epecially in the diesel engines are going up. That is one of the standards which are continuously being changed with regard to the higher performance and higher emission requirement norms that are coming up. Today, the diesel engines are already reached 230 to 240 bar peak pressure and there are very few technologies globally which can answer that requirement. We are one of them. So, there is no question of all OEMs, especially in the diesel segment, who are upgrading their engines will have to look at Sankar Sealings JP as the potential partner. We have already started the development with a lot of diesel engine manufacturers in India as well as abroad.
What is the significance of setting up a greenfield facility at Sriperumbudur?
Well, our JV partner JP Gaskets is one of the major suppliers to Hyundai in Korea. So, that is always a potential to localise those gaskets in India in the future. What is more, Chennai is now becoming the hub for the automotive industry, as it is rightly called the Detroit of Automotive Industry and the region is growing tremendously, more particularly in the auto component segment. Apart from OEMs, the auto components business is being focused in Chennai region. So, it makes a lot of sense for us to be very close to our customer.
What is the status of the Sriperumbudur plant right now?
The plant is almost ready. We will start production in April 2012.
What is the land area and what is the built up area of your new facility at Sriperumbudur facility?
As for the built up area, we have 40,000 square feet of constructed buidling in phase one. This will get expanded to a similar size in phase two.
What is the total investment you have envisaged for this new plant and what will be the investment for the first phase?
Our total investment is Rs 45 crore, out of which Rs 20 crore is the investment for phase one and with an employment capability for employing 250 persons in the initial phase another 150 persons in the second phase.
Can you talk about the Uttaranchal plant?
We have started the Uttaranchal facility four years ago. This facility is primarily catering to Tata Motors and Ashok Leyland. We are also using this plant to cater to our aftermarket business in India. So, that has become a focus of our operations today. The plant is doing extremely well and I think, we had a record, we broke even in two and a half years.
In the commercial vehicle segment, NVH is one segment Sankar Sealing will be looking at with renewed interest, can you shed more light on that?
Yes, we have entered and diversifyied into this particular segment of noise vibration harshness. NVH is one of the our focus area again. We will be focusing that at the Auto Expo with some new products. We are working with multiple partners today compared to a single partner years ago. We are still working with Volverine, but we also have different partners, who are market leaders in different technologies. We are extensively providing NVH solutions to companies like Tata Motors, Ashok Leyland, TAFE, Simpson, Eicher and we are almost working on 40 projects parallely. What is more, NVH, like emission have become very critical issue and the technology that we are offering is one of the most low cost and most effective technology.
Do you supply to SUVs as well ?
It applies to any engine, particularly for diesel, because noise levels and vibrations are much higher in diesel engines.
What is the percentage of business you have in the domestic market vis a vis, export market?
The domestic market is about 65 percent and 25 percent export and the balance is the aftermarket.
Among the domestic clients how big is your portfolio?
We supply to large spectrum of customers. Of course, the most important or the biggest customers are Ashok Leyland and Tata Motors. We have grown with them right from the beginning. Now of course, Mahindra is our very big customer. Kirloskar is our customer, Greaves is our customer. Most of the engine manufacturers are our patrons.
Can you talk about other projects like Ashok Leyland Nissan LCV for instance...
You know the Ashok Leyland Dost which has been launched by the joint venture company Nissan-Ashok Leyland we are single source supplier and we have one of the most successful development processes which was validated during the particular development. It was a brand new engine which was conceptualised and then brought into reality. We were the sealing solution partners and on the cylinder head gasket, which is the most critical development, we did not even have a single failure right from the prototype stage. That is primarly due to the advanced simulation and computerised analysis that we did to ensure that failures are not there. So, basically our validation and testing processes are in line or better than any company in the world today.
The interesting phase in Nissan-Ashok Leyland joint venture, they are planning a slew of products and with the introduction of Ashok Leyland Dost and the resultant positive response, will you eventually be working on other projects as well?
Definitely, we will be working very closely with them. I think this a great opportunity given to us by Ashok Leyland, giving us tremendous amount of confidence, especially for a new engine launch. Ashok Leyland is extremely happy with the performance and of course, the whole team is happy. It is definitely paving way to a lot more development with customers. This is a kind of a success that we are going to take to other customers as well. It is not just going to remain with one customer alone.
Can you throw more light on your R&D activities....
On the R&D activity, a lot of our development processes and and activities, simulation, analysis takes place still with our partners, because we have not set up the R&D lab yet. Probably, we are two years away to reach a critical mass or critical volume to do those kinds of investment.
Your R&D is mostly associated with projects right? Suppose if it is Mahindra, you will work in tandem with them at their design centre near Chennai....please elaborate on that?
True, it is all project based and customer based, while a lot of development activity that take place at customer end, but a lot of them happens with our partners or our collaborators or our technology providers. So, they do the testing and validation and it happens in various technology centres like the one we have in Germany, one in the US, where most of these validations take place for the NVH. For the gaskets, it happens in Sankar Sealings Chennai, our main plant as well as our JV partner in Japan.
Coming back to the two-wheeler alliance what more clarity you can provide?
We are entering into the two-wheeler gasket aftermarket in India. Presently, 85 percent of the Indian aftermarket is catered by unorganised sector and mostly companies which have no technology background are in this business. So, we are trying to see that and to close that gap. It is a huge aftermarket, which is developing in the two-wheeler segment, we need to address it and we are going to address it. This Auto Expo, we are also going to launch the aftermarket products for the two-wheeler.
Approximately, how many products you are planning to launch during the Delhi Auto Expo?
We will be launching products for all motorcycle ranges. We already have products right from Ind-Suzuki 100 cc motorcycle, the Hero Honda, the two-stroke Kawasaki Bajaj, till the latest models like the Yamaha, Suzuki or Honda or Hero MotoCorp or even TVS. The entire range of gaskets we are going to be showcasing.
How big is the aftermarket for two-wheeler gaskets in India? How do you plan to tackle the fake product menace?
It is about Rs 250 crore. If you look at the positioning of the product, it is at a low quality and low price today. The other product that is available is basically from the OEMs or the OE spares, which is high in quality at very high price. We are trying to spread our product in a band which is priced in between the OEM and the gaskets with low quality level, but at the same time the quality level as good or even better technology than what the OEMs are offering. So, we are actually putting a very high quality product at a medium level price, by which the customer will get lot of affordability.
When did you sign the agreement with the Japanese firm JP Gaskets?
This is again a record by any standards. Normally, a joint venture with a Japanese company takes a minimum of two to two and a half years in order to be matured out into a production level. We will be going to production within one year from the date of signing the joint venture agreement with JP Gaskets. The developments are happening in a quickened pace and our partner is also very keen to start the production.
What is the level of construction activity that is happening there in the new facility at Sriperumbudur?
The construction is all completed and now and a lot of machinery is comming from Japan. The installation of these machinery would start in a month's time.
Is the JV only for technology sharing?
It is a 60:40 JV and Sankar Sealing will hold 60 percent stake and the balance by our partner, JP Gaskets. For two years, personnel from our partner's end will be stationed at the plant and the production will be manned by them, but they won't be there on a permanent basis, because we are trying to keep the plant at a very low cost as we need to give the Indian manufacturing advantage to our customers. So, we cannot afford to have Japanese people in the long term. Today, the Indian engineers are very capable and once we train our workforce, I think, there is no issue. We can reach the same kind of manufacturing capability like the Japanese or German partners.
All the divisions put together, what is your turnover? With the new division coming up, what would be your benchmark?
Sankar Sealing Systems' annual turnover is approximately Rs 130 crore. We are looking at reaching Rs 250 crore within two years, which is very much possible. Then we are looking at touching Rs 350 crore in the fourth year.
Will all your investments be internal accruals?
Yes, as I told you, there are two phases of operations in the Sriperumbudur JV. We have already started the activity for the Pune Chakan plant. We have already purchased land and the construction work has started. So by December 2012, Sankar Sealing Solutions' Chakan plant will also be operational. The Chakan plant will take care of all the OEM customers in that region and North American and South American markets for the exports. Sankar Sealing Solutions' Uttaranchal facility will basically cater to OEMs up north, as well as aftermarket market for whole of India. The present Chennai plant (at Vanagaram, on the outskirts of Chennai) will handle exports for the rest of the world and all domestic OEs other than high technology products that our joint venture at Sriperumbudur will be manufacturing.
Is it an EOU?
It isn't an EOU. The new joint venture is basically manufacturing multi-layer steel cylinder head gaskets and metal based gaskets solutions. So, these are the next generation technology gaskets. Maybe in five years time, all gaskets will move to this technology.
Will you be going public any time soon?
Yes, we are looking at that very seriously. So, we are looking at a window of probably two to three years time.
Any acquisition plans on the cards?
No acquisition plan as such, but we are looking at merging some of our group firms to consolidate our activity and have a much more efficient approach to the business. So that will happen this year and next year before other such plans like going for acquisition.
Coming back to Auto Expo 2012, what all products you will be showcasing there and what will be your focus area?
We are bringing new technology products which we are going to be bringing out from our JV plant at Sriperumbudur. We are also bringing in a lot of new advanced materials which are going to change the benchmarking of costing in our industry. Some of them have already being into the development for the last three to four years in our R&D. So, these are going to bring down the cost of our products on a global level and competition will reach a different level altogether. So, we are trying to bring in those or showcase those technologies through the Auto Expo. As cost is the major driving factor for OEMs today and we are trying to address that.
Will you be looking at adding up few more OEMs at the Delhi Auto Expo 2012?
Definitely, Auto Expo has been very successful for us from our business perspective. A lot many companies that we are working today were started from the Auto Expo. We are very sure and hopeful and our investment into the Auto Expo and to the exhibition itself has been increasing year on year. Unfortunately, we won't get enough space to display which is the problem everybody is facing today.
Lot many players in the commercial vehicle segment are entering the Indian space. A case in point is the GM India SAIC alliance. Will you be looking at clinching the deal?
We will definitely be looking at adding more OEMs to our portfolio. We already have worked with Mahindra Navistar. We are soon going to be work with other major multi-national OEMs. We have already started work on development with Caterpillar for global engine development. So, India and the Indian JV is going to become a global hub for diesel engine gaskets. Even our JV partner is going to make India plant as a global hub for diesel engine gasket manufacturing. So, it will make lot of sense not only for Indian market but also for a global platform as well.
There are other segments like construction equipment, agriculture (farm products) that includes tractors. What will be your focus on these areas?
Yes, with tractors, we are already working with TAFE and Simpson. A lot many engines that are manfuacturered by Kirloskar and Greaves are going to the tractor industry. But that has never been a focus until now. But I think in the next three years we are not going to leave that segment untapped. We are already working on many new engines with Simpsons, Kirloskar, Greaves and also various other tractor manfacturing firms like Sonalika for instance. So, we are working with them as well.
How about John Deere Ashok Leyland alliance, will you be working with them as well?
Yes, we will be talking to them probably during the Auto Expo or later. Right now, we are not working with John Deere. But I think, potentially yes.
There are lot many players in the construction equipment, especially in the mining sector...
We are already the largest supplier to Bharat Earth Movers Limited. Almost 100 percent of their critical gasket requirement is catered by us. BEML has a very big share of the market in the large earth moving equipment business. In the construction industry, in cement mixers and those kinds of equipment, we are very strong because that engines that go into those areas we are very prominent.
How about firms such as Schwing Stetter...
Yes, they use engines from Greaves and we supply gaskets to the latter. So, that we are connected to Swchwing Stetter...
That way Sriperumbudur will be the ideal location....
Yes, Sriperumbudur makes a lot of sense because we have Gummidipoondi, where Greaves makes engines. We have Ranipet, close by which again Greaves is making diesel engines. SAME Deutz-Fahr has a unit there at Ranipet. We have Komatsu in Chennai, Caterpillar so all these engine plants put together it has a huge business potential.
What is the new concept that you have envisaged in the aftermarket business?
We are coming out with a new concept in aftermarket for four-wheeler, six-wheeler and stationery engine gaskets. We are trying to address the customer requirement as to what it is being done today. We are going with products which are tailor made or meeting the requirements. We have a new packaging with a new branding. We are coming out with a new brand called Sanko Seal and this is what we are going to indicate. Sanko Seal has very high technology for aftermarket conditions, especially the aftermarket requires very high level of coating technology because the engines are not as good as the new ones. So, the surface finish and other things are not so good. So, we are using some very special coatings and that is why we are calling this Sanko Seal. We are coming out with some very special products. It is just not packaging or brand but the whole concept of Sanko Seal is different from what the other competitiors are providing.
Last but not the least, what will be Sankar Sealing's focus in the year 2012?
The focus wil be to sustain and grow and 2012 is going to be a very difficult year from our prediction. We are going to see a lot of uncertainity in this year and that is what we predict. To sustain and grow in this year will be a challenge and we are looking forward to precisely that.