FAG Bearings is optimistic about growth in the face of challenges.

Story by: Ashish Bhatia

FAG Bearings, a Schaeffler Group company, is optimistic about growth in India. Albeit with a rider that the key initiatives announced by the government are effectively implemented. One of the three Schaeffler Group companies, the two other being INA and LuK, FAG Bearings has a wholly owned subsidiary in India called FAG Bearings India. It was established in the mid-60s, and has come to specialise in the manufacture of automotive and industrial products. Having a presence in the OE as well as the aftermarket, the automotive product portfolio of the company comprises of ball bearings, wheel bearings, cylindrical roller bearings and spherical roller bearings ranging from 35 mm to 320 mm. For the commercial vehicle industry, the company supplies a wide variety of bearing types including tapered roller bearing, insert units, hub units, axle modules, etc. The company also supplies seals and sealing kits for heavy commercial vehicles. The wheel bearing repair set WheelPro, which the company offers, is a part of the range of wheel bearing sets that cater mainly to trucks.

Well aware of the continuing replacement demand in the medium and heavy commercial vehicle segment apart from the return of light commercial vehicles to positive, FAG Bearings India has benefited from an investment of Euro 150 million undertaken by the Schaeffler Group over the last three to four years. Almost half of the Euro 150 million were invested in the construction of the FAG Savli plant, which went on stream in 2012. Some amount was also invested in the modernisation and expansion of the Vadodara plant. Involving the expansion of other Group plants at Pune and Hosur, the Euro 150 million investment, claim industry sources, is in-line with the Group’s strategy to strengthen the manufacturing footprint in India as well as continuous development of R&D and advanced engineering capability, FAG Bearings India products find use in crucial assemblies and modules like drivetrain and chassis. These are known to be not just crucial to the safe and smooth functioning of an automobile, but also subject to adaptation and design changes to meet the local demands.

Catering to passenger vehicles, construction equipment and tractors apart from commercial vehicles, FAG Bearings also exports a good deal of what it produces in India. The products exported find use with manufacturers like Daimler, Volvo and Volkswagen among others. Targeting exports markets of Europe, USA and Asia, the company held its fifty-third Annual General Meeting (AGM) at Mumbai recently. It was attended by Schaeffler’s German board of directors including Schaeffler AG Chief Executive Officer Klaus Rosenfeld. Touching upon the cyclic recovery of the commercial vehicle industry, emphasis was laid on the good monsoon forecast, which is expected to revive rural sentiments and boost rural demand. Stress was also laid on government initiatives like ‘Make in India’.

Macro environment

Optimistic about growth emanating from the overhauling of infrastructure, ease of doing business, railways, financial inclusivity and digitisation, despite a slow start in the first quarter of 2016, the company, claimed sources is looking at ways to align its business to the Automotive Mission Plan 2026. The Automotive Mission Plan is the collective vision of the Government of India (GOI) and the Indian Automotive Industry. It takes into account vehicle, auto components and tractor industry growth over the next decade; in terms of size, contribution to India’s development, global footprint, technological maturity, competitiveness and institutional structuring and capabilities. Expected to set the course of evolution of specific regulations and policies that govern areas like research, design, technology, testing, manufacturing, import and export, and also the sale, use, repair and recycling of automotive vehicles, components and services, the Automotive Mission Plan is looked upon as an important goal in terms of the auto industry growth.

Performance

Stating that his company had to tackle headwinds in 2015 generated by the market environment, Avinash Gandhi, chairman of FAG Bearings expressed that the company’s revenue grew by 6.4 per cent. He declared that the Profit Before Tax (PBT) for the year 2015 was higher than the previous year at 26 per cent at Rs.2938 million. PBT in 2014 was Rs.2323 million. The negative performance of the off-highway segment was apparent. Other sectors and exports, said Gandhi, performed moderately well in comparison. Exports revenue dipped to 4.7 per cent. Testimony to having attained increased operational efficiency and enhanced manufacturing, Gandhi declared a double digit growth at both its plants at Maneja and Savli respectively. Looking at improving manufacturing localisation drastically, from a mere 1.5 per cent at present, the company shared plans to invest Rs. 80 crore over the next few years in an effort to achieve a Compounded Annual Growth Rate (CAGR) of 15 per cent.

Emphasising growth

Aiming at a CAGR of 15 per cent, there is little doubt that FAG Bearings is about to see a good deal of changes being accounted to itself. This would involve fine tuning of processes and system competencies. With an eye on the changing legislations and emission

levels pertaining to automobiles, FAG Bearings India continues to operate under the Group strategy to invest in the next generation of technology solutions. The company, apart from working closely with its clients to provide tailor-made OE solutions, is said to be also working towards offering quality aftermarket solutions. As far as the company’s participation in the agricultural sector is concerned, the X-life bearings continue to be the key focus area. These bearings are claimed to offer higher base dynamic load ratings compared to conventional products, resulting in a longer service life. Said to contribute towards improving the overall cost effectiveness of the application under the total cost of ownership principle, FAG tapered roller bearings, radial spherical roller bearings, four point contact bearings, double row angular contact ball bearings, TORB toroidal roller bearings and tapered roller bearings are some of the X-life products offered. In railways, the company has a 17 per cent market share. It supplies wheel set bearings and drivetrain bearings. Aiming to perform twice as much in the aftermarket, FAG Bearings India is looking at offering some innovative solutions in the area of clutch, engine, transmission and chassis. Continuing to focus on bearings and related components for cross sector application across automotive, agricultural, rail and the aftermarket, FAG Bearings

India, there is no doubt, has a reason to be optimistic about growth.