abhishreshthaa
Abhijeet S
ABOUT THE COMPANY:
SKF is the world's leading technology & solutions provider of bearings, seals, related products, systems and services to the Aerospace, Automotive, Electrical and Industrial sectors. .
SKF began operations in India in the ’30s as a sales company. It was incorporated in its present form in 1961, jointly by the international giant SKF Sweden, SKF UK and Investment Corporation of India (of the Tata group). SKF Sweden holds 51% of the equity.
SKF in India is a Rs 6000 M business with three production facilities and employs over 2000 people. With an extensive and growing network of over 225 distributors across the country, the company enjoys a majority market position.
Manufacturing activities began with the commissioning of the Pune plant, which currently has a capacity to manufacture 22.25mn bearings. Its second plant came up in 1990, at Bommasandra at Bangalore, with an installed capacity of 40mn bearings.
THE STRATEGY:
Some of the initiatives taken by the management of SKF Bearings have proved to be timely. These steps included the company’s voluntary retirement scheme and the opening of the Rs 88-crore rights equity-cum-non-convertible debentures issue about a year back. These steps have begun bearing desired results over the recent quarters.
The company has made a turnaround. In Last year ended December 2001, it did well through improved operational efficiencies and major cost cutting in interest costs.
It benefited through the across-the-board revival in most segments of the automotives sector, particularly commercial vehicles.
SKF Bearings now starting to lay greater thrust on the replacement market where it was lagging behind earlier, the company has shown an impressive performance for the 12 months ended December 2002.
Turnaround factor:
From 1994-1997, India's bearing demand grew at a compound 22% rate, but in 1997 the economy dipped into recession which has gradually worsened.
SKF Bearings, one key development has been the management's decision to float a Rs 88-crore rights equity-cum-NCD issue about 15 months back.
The rights issue was floated when the company was in dire straits and minority shareholders were unwilling to subscribe to the rights issue.
The company was closely monitoring sales and administrative costs. The funding moves are designed to allow the company to pay down its existing debt load and fund unspecified future expansion projects.
The rights issue is an integral part of the company's comprehensive restructuring and allowed it to proceed with its investment plans in India, and at the same time allowed to reduce borrowings and thereby our financial cost. This, in turn, helped to improve bottom line.
This proved to be a masterstroke and the issue was fully subscribed. The company paid back Rs 87 crore in borrowings by December 2001.
It used some part of internal accruals for modernizing its plants. Since then, growth in the auto sector picked up. All these factors helped SKF Bearings achieve a healthy 13.6% growth in sales and 127% surge in bottom line in the year ended December 2002.
The new game plan has already seen SKF Bearings
Cut costs wherever possible,
Reach out to end customers
Take prudent recourse to outsourcing.
The company started outsourcing low value components from `competent suppliers'. In fact, it had even wound up its IT (information technology) wing and begun outsourcing the service.
The IT wing ``has been taken over along with its personnel by Electronic Data Systems, Chennai. The objective was to ensure that the company remained focused on its core business.
The company also shifted focus away from dependence on automotive demand, expanding its focus on India's export markets and working to protect domestic market share by aggressively attacking counterfeits. Counterfeit bearings alone account for up to 40% of the Indian market.
That restructuring created three business units:
Automotive Unit,
Electrical Unit
Industrial Unit.
SKF India exported only 10% of its production. The Pune plant's modernization, along with an increased emphasis on unitized hub assemblies, will open capacity and quality to export markets more readily. The Bangalore factory currently exports a third of its production.
Demand for automotive applications has weakened dramatically in the recession, so SKF is moving production capacity away from automotive applications toward more stable general industrial equipment and service markets.
India's automotive sector currently absorbs 45% of SKF's output. They are continuously broadening our product portfolio. SKF and other Indian bearing manufacturers are also facing a growing challenge by cheap imports from Eastern Europe, Southeast Asia and China. Bearings from those countries are often sold into India below cost, a tactic known as "dumping".
SKF is the world's leading technology & solutions provider of bearings, seals, related products, systems and services to the Aerospace, Automotive, Electrical and Industrial sectors. .
SKF began operations in India in the ’30s as a sales company. It was incorporated in its present form in 1961, jointly by the international giant SKF Sweden, SKF UK and Investment Corporation of India (of the Tata group). SKF Sweden holds 51% of the equity.
SKF in India is a Rs 6000 M business with three production facilities and employs over 2000 people. With an extensive and growing network of over 225 distributors across the country, the company enjoys a majority market position.
Manufacturing activities began with the commissioning of the Pune plant, which currently has a capacity to manufacture 22.25mn bearings. Its second plant came up in 1990, at Bommasandra at Bangalore, with an installed capacity of 40mn bearings.
THE STRATEGY:
Some of the initiatives taken by the management of SKF Bearings have proved to be timely. These steps included the company’s voluntary retirement scheme and the opening of the Rs 88-crore rights equity-cum-non-convertible debentures issue about a year back. These steps have begun bearing desired results over the recent quarters.
The company has made a turnaround. In Last year ended December 2001, it did well through improved operational efficiencies and major cost cutting in interest costs.
It benefited through the across-the-board revival in most segments of the automotives sector, particularly commercial vehicles.
SKF Bearings now starting to lay greater thrust on the replacement market where it was lagging behind earlier, the company has shown an impressive performance for the 12 months ended December 2002.
Turnaround factor:
From 1994-1997, India's bearing demand grew at a compound 22% rate, but in 1997 the economy dipped into recession which has gradually worsened.
SKF Bearings, one key development has been the management's decision to float a Rs 88-crore rights equity-cum-NCD issue about 15 months back.
The rights issue was floated when the company was in dire straits and minority shareholders were unwilling to subscribe to the rights issue.
The company was closely monitoring sales and administrative costs. The funding moves are designed to allow the company to pay down its existing debt load and fund unspecified future expansion projects.
The rights issue is an integral part of the company's comprehensive restructuring and allowed it to proceed with its investment plans in India, and at the same time allowed to reduce borrowings and thereby our financial cost. This, in turn, helped to improve bottom line.
This proved to be a masterstroke and the issue was fully subscribed. The company paid back Rs 87 crore in borrowings by December 2001.
It used some part of internal accruals for modernizing its plants. Since then, growth in the auto sector picked up. All these factors helped SKF Bearings achieve a healthy 13.6% growth in sales and 127% surge in bottom line in the year ended December 2002.
The new game plan has already seen SKF Bearings
Cut costs wherever possible,
Reach out to end customers
Take prudent recourse to outsourcing.
The company started outsourcing low value components from `competent suppliers'. In fact, it had even wound up its IT (information technology) wing and begun outsourcing the service.
The IT wing ``has been taken over along with its personnel by Electronic Data Systems, Chennai. The objective was to ensure that the company remained focused on its core business.
The company also shifted focus away from dependence on automotive demand, expanding its focus on India's export markets and working to protect domestic market share by aggressively attacking counterfeits. Counterfeit bearings alone account for up to 40% of the Indian market.
That restructuring created three business units:
Automotive Unit,
Electrical Unit
Industrial Unit.
SKF India exported only 10% of its production. The Pune plant's modernization, along with an increased emphasis on unitized hub assemblies, will open capacity and quality to export markets more readily. The Bangalore factory currently exports a third of its production.
Demand for automotive applications has weakened dramatically in the recession, so SKF is moving production capacity away from automotive applications toward more stable general industrial equipment and service markets.
India's automotive sector currently absorbs 45% of SKF's output. They are continuously broadening our product portfolio. SKF and other Indian bearing manufacturers are also facing a growing challenge by cheap imports from Eastern Europe, Southeast Asia and China. Bearings from those countries are often sold into India below cost, a tactic known as "dumping".