11,992.50-53.3
Stock Analysis, IPO, Mutual Funds, Bonds & More

In India, commercial vehicles unlikely to do well in 2020: Timken India CMD

There is going to be a little bit of pre-buying and January-February should be okay. Our endeavour is to make sure that we keep on generating as much value as possible. Timken India is a leader in supply chaining the bearing pieces. I am not unduly worried on the margin front. Exports are okay for us, but not that great.

ET Now|
Last Updated: Jan 06, 2020, 09.25 AM IST
0Comments
ETMarkets.com
Sanjay Koul-1200
We are generally playing the industrial market of the large space and not the small space, though we want to serve all markets, says Sanjay Koul, CMD, Timken India. Excerpts from an interview with ETNOW.

The street has rewarded Timken India share irrespective of what we have seen in the auto industry as well as the sluggishness in infra activity. What are some of the avenues that you are identifying to offset these slowdown concerns?
Every time the emission norms change, there is a dip in the market. This time around, the commercial vehicle market dipped before the emission norms came into effect. This time because of the fact that axle load changed and rest of the liquidity issues played a role and demand dipped.

I am sure that the rebound is also going to be a little bit early because of the fact that the inventory corrections have taken place in the market, liquidity is going to be sorted out and I am sure that the man on the road is going to be able to borrow the traditional LFOs and small truck owners are able to go and borrow money.

While the inventory correction has taken place, there is going to be a little bit of pre-buying. So, January-February should be okay. Then, as liquidity eases out and freight movement takes place, we might be pleasantly surprised to see that the market comes back a little bit early.

But of course, we had a great run of four years and this dip was expected. Only, it came a bit sooner, which is unfortunate. I am sure the inherent market condition which is demand driven out of India is strong enough and with a little bit of help from the policy makers -- scrapping the vehicle after 15 years -- and a push in the liquidity, we might get a little bit better in 2020 post September.

A large part of your business also comes from the power transmission space. Some would say there is a challenge because power sector is in doldrums, utilities are not expanding, private guys are not expanding, state discoms do not have money, the supply chain is in a problem in the entire power sector so what does that mean for your power transmission business?
Basically Timken serves fragmented markets. Anything which has wheels or anything which is moving on stationary equipment, needs a bearing. As we have the strategy of serving fragmented markets -- be it on road, off road, off highway, rails, trains, power, coal, mining, we serve these diverse fragmented market.

While there is a dip in the coal side, we see a very strong offtake in terms of the wind market. Wind has been a nice 2019 surprise for everybody in the market. Wind power has taken off, not only for domestic consumption but also a lot of gear box manufacturers are exporting gear boxes out of India to other markets, including China.

What is your product mix going to be like? Would there be a higher contribution of power or would auto ancillary provide the largest share of revenues?
This is a very important question especially for companies which have to make sure that their strategies are right. In 2020, in India commercial vehicles would not do well, but they would start coming up slowly and steadily. Rail, in India would be pretty much good and when I say rail, it is divided into locomotives, freight and passenger.

In passenger, there is a further division into mass rapid transportation, which is the Metro rail. In India, the rail system including metros is being modernised and they are being made high speed and highly safe. This market would be pretty okay.

As the infrastructure push from the government takes place, off highway market should be okay and we have seen December was a decent month as far as the excavators and backhoes are concerned in India. Power coming out of thermal should not be great but at the same time, wind would be pretty much good.

We have seen the commodity prices going up. I am expecting steel not to be that bad and with steel, the MRO business generally remains okay. On a whole, 2020 would be a mixed bag. The commercial vehicles which have a huge traction as it consumes a lot of small bearings might not be great. The other areas which consume large value bearings would be okay.

How much of your business is coming from the non-SME and SME sector? How would you classify your business not industry wise but category wise in terms of your clientele?
Our business from the small sector is very small, though every customer is important and we serve the segmented market. But generally, if you talk about the MRO, we are serving the large markets of mining, power, cement and metal.

For example, we hardly supply any bearings in the Manesar belt. This is the small scale industry which consumes bearings on their machine tools, etc. We are generally playing the industrial market of the large space and not the small space, though we want to serve all markets.

Let us talk about exports as well. Expected exports are about 50% of sales for the next few years. Tell us about the facilities, the kind of business you are clocking in. How do you see exports panning out?
Exports have been an important part of our strategy. For many years, we have been exporting both in terms of heavy trucks of highways and railway systems. We continue exporting these to different markets around the globe, The rail market globally is not that bad but the heavy truck market is a little bit down. But we keep on serving all the markets. We serve Chinese, African, American, European and even Russian markets. If one market is down, another market would be up.

We have been able to serve these different export markets. But when the global markets are struggling themselves, it is a challenge for emerging markets as the supply chains have not really changed a lot in the last decade or so. But I would still say that exports are okay for us, if not great.

What exactly is going to be the margin catalyst for you going forward? Are we going to see a revival or would you be able to maintain last year’s margin levels at best?
For margins, you need two aspects. One is the cost and another is price. I do not think the prices are going to go up. So, we have been able to get whatever prices we got in the last 18 odd months. Those prices are what we got and I do not think there is going to be any price uptick.

As far as the cost is concerned, what is going to help on margins is the very robust supply chain that we have created. For example, our Jamshedpur plant can go from melt to finish bearing within a radius of 20 kilometres. That is the power of supply chain which eventually cuts waste. We are relentlessly working on cutting waste. We make sure that we do not waste a downturn. We continuously work on our cost front so that we optimise and generate less and less waste. On the price front, there is going to be a stagnant pricing.

I do not think there would be any great pricing coming our way. In short, our endeavour is to make sure that we keep on generating as much value as possible. Timken India is a leader in supply chaining the bearing pieces. I am not unduly worried on the margin front.

Also Read

State Bank of India, Bank of India cut MCLR

Integrate 'Assemble in India' into 'Make in India' to boost exports, create jobs: Survey

Budget 2020: 'India needs policies that will benefit women workforce in rural India'

Reliance to bring Balenciaga to India

Board Meetings Today: HDFC AMC, ZEEL, Havells India, IndiaMart and Granules India

Comments
Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links


Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service