Krishna Group to invest Rs 500 cr on new JVs; to add Rs 2000 crore to turnover till 2020

Nov 18 2017

The JVs will involve setting up greenfield facilities for making the new products with the first to come up at Gurgaon, followed by the second at Gujarat, and the third at Chennai.

New Delhi: The Gurgaon-based Krishna Group is firing on all cylinders. Piggybacking on the growth of its key customer Maruti Suzuki India (MSIL) that hogs the lion’s share of 90 per cent of its business, the Group has several new joint ventures lined up in its kitty.

For a start, it is beefing up to invest Rs 500 crore over the next five years on three joint ventures of which two will be new projects, and the third an existing business stream- the toolroom, Ashok Kapur, Chairman of the Krishna Group told ETAuto in an exclusive interaction.

The two new projects will involve inking joint ventures with a couple of Japanese auto component companies for making interior- exterior passenger vehicle assemblies.

For this, the company has already entered into a confidential agreement with the two players, and the nitty gritties of the JVs will be finalized in the next 3 months.

The JVs will involve setting up greenfield facilities for making the new products with the first to come up at Gurgaon, followed by the second coming up at Gujarat, where the Krishna Group has already set up a strong infrastructure besides at Chennai.

Work is slated to kick off on the first plant next year with production to go on stream by 2018-end.

Funding for the investment will be primarily through internal accruals and the balance through debt based on the stakes held by the JV partners. The new assemblies will service Maruti Suzuki as well as other OEMs.

Also in the pipeline is a JV for localizing its tools that are currently imported.

“We are in discussion with a large toolmaker to join us and this should be finalized within 3 months,” confirmed Kapur.


Strengthening its Gujarat portfolio

The Krishna Group has recently set up 7 manufacturing facilities for Suzuki and Maruti Suzuki at Gujarat for various components, and the company claims it is the only metal supplier to be located in the carmakers JV Park. These parts are manufactured by its group company SKH Metals and other subsidiaries under the SKH banner run by his son, Sunandan Kapur, vice chairman, in addition to Krishna Maruti companies.

Seating, door trims, high tensile steel parts plants are located in the Park in Mehsana district, while the remaining four facilities are outside the Park and deal in plastic components, mirrors and trims.

These facilities will initially meet the requirements of Suzuki and then look at Ford, Tata Motors and Honda Motorcycle and Scooter India that have their production units in the vicinity in Gujarat. Supplies to other OEMs are expected to commence after a year.

Kapur maintained that the next policy decision of the Indian government that relates to electric vehicles (EV) is also on their radar, and the group will enter this segment with a strong product portfolio that will not later turn obsolete.The group has invested Rs 700 crore on these 7 facilities with over 80 per cent funded through internal accruals and the balance tapped with debt.

The group has been dealing with MSIL for 23 years now, and has followed it to all its Indian locations. The Krishna Group has a JV with Suzuki and Maruti, wherein the family business holds a 55 per cent stake, with Suzuki retaining 29 per cent and 16 per cent stake held by formerly Maruti Udyog. This JV was inked in 1994.

The Krishna Group just inaugurated its seating, metal products, plastics and trim facilities at Gujarat with the roof headliners and mirror plants to be operational by December under phase I, to meet Maruti Suzuki’s initial demand for 250,000 units per annum in the initial stage.

As MSIL steps on the pedal to reach a production of 2 million by 2020, so too will the Krishna Group ramp up its production capacity in stages.

In fact each of Maruti’s premium Baleno hatchbacks that are exported globally carry components to the tune of Rs 40,000 made from the Krishna stable, according to Kapur.

He said that in the first full year of production that will be 2018-19, the Gujarat plants will together generate a revenue of Rs 1,000 crore, and will be in full production by 1 January 2018.

Along with its other existing automotive businesses, the group will add a revenue of Rs 2,000 crore by 2020 to its existing turnover that is pegged to cross Rs 5,000 crore in the current financial year. The three new JVs are expected to add another Rs 2,000 crore to the topline by 2022.

The component maker is aiming to rejig its contribution to OEMs with 60 per cent business coming from Maruti Suzuki and the balance 40 per cent from other customers by 2025.

Metal exterior parts are expected to grow speedily, while the interior components business is likely to be slower based on the market demand. The Krishna Group currently has 31 plants pan-India, with its existing facility at Chennai servicing Renault Nissan.


Entering EV segment

The Krishna Group that commenced operations with seating has now diversified across a gamut of product streams through a slew of joint ventures with foreign collaborators.

For instance, Magneti Marelli for exhaust systems, SIAC-Cabs for cab systems and SILA of Italy for gear shift systems, Magna International for seating, Grupo Antolin of Spain for roof headliners, Teijin for textiles, Ishizaki Honten of Japan for mirrors, and Quinette Gallay of France for auditorium seats.

It also has technical alliances with Okamoto for fuel tanks and Futaba of Japan and Benteler of Germany for frame suspensions. In addition, it is also present in CNG kits through other partnerships.

With BS-VI emission norms brewing round the corner, the process of tweaking its exhaust systems and fuel tanks under the JV with Magneti Marelli and SKH at Chennai, Pune and Gurgaon facilities has begun.

Kapur maintained that the next policy decision of the Indian government that relates to electric vehicles (EV) is also on their radar, and the group will enter this segment with a strong product portfolio that will not later turn obsolete.

“We can look at sensors and motors that can be used across vehicles.”

The group has formed a cross functional team to undertake research on EVs with the report to be submitted in January 2018, after which it will decide future plans.

Post-January, they will scout for JV and technology partners as Kapur agreed that the future is electrics. He is also mulling entry into the sphere of battery charging stations, but agreed that it’s still early days and the matter is under investigation.

Recently, the group celebrated the rollout of its 40 millionth seat, a far cry from the 24 seats, which the company used to rollout when it commenced operations in 1994.

Today it makes 1.3 million seats per annum up from the annual 50,000 seats for Maruti Suzuki in the first year of operations, when it generated a revenue of around Rs 128 crore.


Humble beginnings

Originally starting with Sona Steering Systems, along with his brother in 1993, Kapur later restarted his business with the Krishna Group under a business arrangement with his brother, who took over the reins of the Sona Group.

Initially, Sona had a partnership with Maruti Suzuki for making steering systems and later the Krishna group also asked MSIL for a JV for seating systems.

The business that was floated with seating steadily multiplied into different product avenues over the years.

Interestingly, the group is now diversifying into real estate and has signed a JV with the Sumitomo Corp of Japan for developing 12 million sq ft of built up area in Delhi-Gurgaon as part of the Indo-Japanese collaboration in realty. This will build apartments, hotels, offices, shopping complexes with a project sale value of Rs 12,000 crore. It will see a launch in January 2018.

Thus with its hands full with new projects, the Krishna Group, seems on the threshold of a robust double-digit growth right through to 2025.

Source: ETAuto