Varroc Group | Building Capabilities To Tap Future Growth

Varroc Group | Building Capabilities To Tap Future Growth

Diversified manufacturer of automotive components, Aurangabad-based Varroc Group, is pursuing a strategy of expanding into new business areas and investing in technology development to ensure sustainable growth in the future. The slowing economy notwithstanding, the company is looking at further diversifying into businesses that promise significant growth in the next few years. In order to get a better understanding of the developments at the group, we caught up with N Ramanathan, President, Polymer Division (above) and Amit Dakshini, Chief Strategy Officer, Varroc Group (below).

MARKET & ECONOMY – A MIXED BAG

Even though the overall industry is experiencing a downturn, Varroc has been able to offset the negative sentiment to some extent, thanks to growing business from customers such as Honda Motorcycles & Scooter India (HMSI) and Yamaha Motor India Sales (YMIS). For the record, both these two-wheeler makers have been reporting steady month-on-month growth.

Ramanathan said that the company has been able to thwart the effects of the slowdown by a planned expansion of products as well as customer base. Operating multiple business lines naturally gives the company a wide spectrum of products to offer in the market. These include polymers, metallic, electrical (including two-wheeler lighting) and four-wheeler lighting. A wide manufacturing print spanning 32 locations across the globe, including 21 in India alone has also helped the company balance its profit.

In addition, Varroc is presently preparing itself for multiple future product launches. This speaks well of the amount of future business committed to the company. Dakshini said that the slowdown is also helping the company to identify areas and segments of growth for the future, and investing accordingly.

TECHNOLOGY – A PRIMARY GROWTH DRIVER

Ramanathan and Dakshini believe the company’s technical capability is a key focus area and will continue to be one of the key growth drivers for the company in times to come. In line with this strategy, the company’s technical centre in Aurangabad, Maharashtra, is playing an increasingly important role. The centre presently employs about 200 engineers, of which close to 100 are working in the tool design & manufacturing area, while the rest are engaged in R&D and project management activities.

An increased focus in the last couple of years on new product development lead to the technical centre being shifted from a shared location to a dedicated facility with investments in new machines and test & validation facilities. Dakshini said some of the testing & validation machines used for air filters have left customers impressed with the kind of modern technology being used. The polymer business in particular has developed almost all of its technology indigenously unlike the lighting vertical, which got access to Visteon’s lighting technology through an acquisition.

A recent example of the kind of innovation being done at the technical centre is a product developed for three wheelers. The present seats use a base material, on top of which a cushion is laid out. Varroc has instead developed an integrated foam type seat, which is lighter by about 60 % to 70 %. The company has already applied a patent for this technology, reflecting the innovation capability of the technical centre, since this technology also involves usage of new materials and production processes. Although the commercial introduction of this product is yet to be confirmed, the potential of this technology could be huge if the company gets a commercial contract.

Mr. Amit Dakshini Varroc

 

Apart from developing new products, Varroc is also working on downsizing the existing product lines across its business segments. In the two-wheeler segment, the company has recently developed a foam-in-place technology. Conventional seats use a foam cushion around which a cover is stitched and since stitching has its limitations, profiling of seats is not an easy task. Foam-in-place uses an integrated cover on the foam, allowing for flexibility during profiling. This makes it possible for multiple shapes to be formed quickly without use of stitching. This yet to be introduced technology is presently in a prototype stage with patents already been awarded. A commercial introduction of this technology would follow, based on customer contracts.

OUTLOOK

The company plans to continue optimising performance of products for two-wheelers, given the limited operating flexibility within that space. In the four-wheeler segment though, Varroc is focusing on new products in the interiors space. The CV segment is another focus area for the polymer business unit.

Owing to the significant investment in new products and focus on entering new segments, Varroc aims to be a ` 20,000 cr group by 2020. Presently, the group is sized at about ` 6,800 cr, translating into a growth of more than three-folds in about seven years. Dakshini believes these figures aren’t aggressive as in the context of the Indian market and its potential, these are quite realistic numbers. From a segment perspective, Varroc ‘s business is primarily driven by two-wheelers and lighting, and that share will not change in the coming years, said Dakshini. That said, the company will increase the business and share in other segments but not by a radical margin.

Text: Arpit Mahendra