Gala precision Technology is on a roll with a new plant to be commissioned in China and an EOU ready to start operations back home at its Wada unit near Mumbai.

There are no two ways about the fact that the Indian component industry is on a roll. Most of us forget, though, that amidst some of the bigger names that make it to newspaper headlines more often, are small and medium enterprises (SMEs) which have a tougher road ahead.

In this mad tug-of-war where survival of the fittest in imperative, this category will have to work very hard to ensure that it stays afloat. At one level, they deserve greater attention and credit because they are competing in the competitive global arena with far more powerful and merciless counterparts.

It is in this context that the Thane-based Gala Precision Technology has quickly made a mark for itself in the component business. A manufacturer of compressor valve, disc/belleville springs and precision auto components, not many people are possibly aware that it began with a turnover of barely Rs.3.5 crore a decade ago.

Managing director, Kirit Gala who had spent some years studying in the US was determined to set higher goals for the company. “we decided to grow tenfold in ten years and reach a turnover of Rs.35 crore by 2005. I started working on a longer perspective instead of the general SME practice of looking one or two years ahead,” he says.

The goal was achieved a year in advance and today the Rs.70 crore Gala precision is working towards a more ambitious Rs.100 crore turnover this fiscal and mind –boggling Rs.350 crore by 2010. This is remarkable for a company that began with Rs.3.5 crore in 1995. If one has to go back into time a little further, it was the managing director’s father and uncle who had started a company called Gala Springs in Thane about 30 years ago. The facility at Vadodara was set up in 1989 for mass finishing systems. The story trundled along till things began to change dramatically for the better.

The Gala entity of today not only has a slew of high-profile clients both here and overseas but is all set to begin operations in China through a fully –owned subsidiary. This is not all. Its EOU will be commissioned very soon at Wada near Mumbai and this will strengthen its global customer base further. For the record, it has six plants of which three are in Thane.

It is the China foray that is interesting and Gala Precision follows big names like Sundram Fasteners which have already opened shop in that country. “When everybody was talking about the threat from China, I viewed it as an opportunity. This is because if you excel in what you are doing and have the commitment and spiritual orientation to giving your best no matter what, I do not think you need to be bothered about competition".

Business model

“We analysed our strengths as a company as well as the strengths that India offered against the advantages and strengths of China. We came up with a business model which would be successful in the long term. The theme was Indian intelligence, Chinese discipline and the global market,” Gala says.

The company started with an office in Shanghai two years ago and started aggressively marketing itself in the market. The idea was never to buy from, but sell to China. “This is because our quality was acknowledged worldwide. We are the best in certain product groups where we offer the highest fatigue life. This is critical in the life of compressor and we were sure that no company could offer comparative quality,” he adds.

The China innings started off by printing catalogues in Chinese, hiring interpreters and local staff. Gala Precision even participated in two refrigeration and air-conditioning exhibitions. The products were made in India and sold in China and that is the way it is even today.

The plant will become operational within three months. It is a 15,000 square foot facility, wholly owned by a subsidiary styled Gala Precision Technology (Shanghai). The investment in the first year is around Rs.1 crore and this arm will eventually contribute Rs.50 crore to the Rs.350 crore envisaged for 2009-10.

While it is logical to infer that the China plant will play a big role in logistic for ASEAN, the company is working on a northeast Asia strategy. “Everybody is eyeing southeast Asia, but we also want to look at northeast Asia which includes China, Japan, and Korea. The Japanese have invested heavily in Thailand and Indonesia. We want to have a base in China and look at the Japanese and Korean markets from there, “Gala says.

What is even more significant is the fact that the company has diluted a part of its stake to US-based GW Capital which has committed Rs.50 crore. It has already pumped in Rs 15 crore in the first phase.

“What GW saw was very dynamic management, proven products with considerable market share, and tested and approved abroad at the take off stage. To have a 65 per cent market share in India is one thing, but when you send your products to Europe and China they are tested sometimes up to a year. We had all the credentials, so they saw it fit to invest,” Gala says.

The total investment plan for the company over the next three years is Rs.150 crore, out of which Rs. 50 crore will come from GW Capital and the rest will be through debts and internal accruals.

Of this earmarked investment, roughly Rs. 20 crore has been set aside for China over the next two to three years while Rs.70 crore will be invested in India, largely in the Wada plant. Interestingly, the balance Rs. 60 crore will be used for acquisitions that will form an integral part of the growth plan. R&D will be major focus area too.

Asked if GW will take majority control in the near future, Gala retorts, “While that is not part of the plan, I would like to add that I am not like the typical SME entrepreneur who wants majority stake. In fact, we are setting a trend for SMEs where we are spreading the word of 'just open up'.

“What the business needs is more important than my won. We have over 100 engineers and a staff of 240 people, who work for Gala the organization and not Kirit Gala, the person. Together we are building an organization that has to make a mark in the global arena. So whatever is best to grow this business will be done irrespective of who is controlling and how they are controlling.”

Consistent Growth

According to him, one needs to be global in today’s business scenario in order to grow. For instance, in the businesses it operates in, the company has calculated exactly what market size India offers in relationship to the global arena. This is barely between two and for percent. “We already have a market share of 65 percent in India, and it is unrealistic to expect too much growth here,” he says.

Hence, to grow consistently, the solution is either to diversify or intensify core competence to match world market skills. Gala reiterates that this has to be done within the context of a successful business model.

“We figure out that we had to expand capacities and look at China, Europe and America, set up offices there and acquire companies there. My ambition was never to control a small organization but to contribute to the Indian story and make ourselves a significant player in the global market,” he says.

The company is also open to idea of going in for an initial public offer. “This is the right time to tap equity. One is, of course for funds, and the other more important reason is the strategic input into the business growth that equity plays. Our partners, GW Capital, have increased our management bandwidth considerably. But I have offer them an exit route after three to five years and that is the time the IPO will happen,” Gala says.

By the end of 2008, Gala Precision will have completed its investments plans for Rs.150 crore after which time it will be well placed to reach the Rs.350 crore turnover target.

“However, my vision goes beyond that; what happens eight years from now, or ten years from now? So we need another plan in place and the IPO is part of that plan. Private placements is also an options,” he adds.

Today, the company, which has a 65 percent share of the local market for compressor valves, already supplies to a wide variety of international clients from Wada.

Rather then being a mere supplier, it now plans to move up the value chain and become a solutions provider. Towards this, its in-house design and development team is already working closely with customers on new products as well as the improving the existing range.

At present, it operates in four categories. The first is finishing solution where it makes the complete systems. Compressor valves contribute to 40 to 50 percent of turnover.

The company makes valves for all types of compressors. In industrial compressors, it supplies to Elgi Equipment, Kirloskar Pneumatics while in refrigeration ACs, it meets the needs of Voltas and Blue Star.

In hermetically sealed window ACs, the clients include Godrej, LG and Carrier. In car Acs, Gala Precision supplies to Subros and worldwide to Sanden.

It also makes brake compressor for Sundaram Clayton while discussions are on with Knorr-Bremse in China (this has been another reason for the China foray).

The company supplies to Wabco in Germany and is in talks with Matsushita in Singapore, which has okayed its reeds for its small refrigerators worldwide.

The other business is disc springs, where it caters to Valeo in France and Repco. Interestingly, for the combi–screws Sundram Fasterners supplies to General Motors and John Deere, Gala Precision’s input is a small washer/disc spring.

In mass finishing systems, Reco Auto and JMB are some of the more prominent clients along with big OEMs like Hero Honda, Bajaj Auto and Tata Motors.

China Operation

Gala says that India’s global image has changed dramatically over the last four years though the world market is still not easy to crack. The are questions about the quality and timely delivery.

“Global customers are often too busy to visit our plants. You need constant interaction with the customers, especially in the components business. We are not a commodity and cannot send a quote over the e-mails and hope to get orders. We trying to bridge this communications barrier by going to China so that we can increase interaction and show where we stand in the quality game,” Gala says.

China is critical because it the flavour of the global community and is perceived to be way ahead of India in areas like infrastructure, mass production and commitment of people to work as a team.

It is not as if Gala disagrees completely with this perception. “Everybody is talking about better infrastructure, but it will be tough to catch up with China. Indian entrepreneurs are very dynamic, probably more so than their counterparts worldwide. Intellectually, we are better too but lack basic infrastructure support,” he rues.

With all this talk about China, Gala adds the tremendous growth is happening in eastern Europe as well where a majority of the company’s European clients do business. Slovakia and Hungary, in particular, are developing very fast.

You may not find Wada on the map of India. It has little to write home about except that it is a dustbowl where the saving grace is the quality of the road.

However, Wada is critical form Gala Precision’s point of view as it has facility here that will soon be an integral part of its global plans. It is here that an EOU is being commissioned during the next three months.

A walk through the plant is enough food for thought, The compressor valve division of the company offers valve plates from fine blanking, sintering (powder metallurgy) or castings for various compressors applications. Its manufacturing facilities comprise the latest machine for grinding, lapping, finishing, fine blanking, coining and heat treatment.

The need to create compressor reed valves that are highly efficient, environment friendly, and have higher critical dimensions has led the company to develop a special proprietary process there use double disc grinders to impart flatness and parallelism to the reeds.

The input condition of the valve plate could be up to 200 to 300 microns flatness but after grinding this is reduced to 50 microns.

Surface deficiencies on the reed lead to a lowering of the overall efficiency of the compressor. The double disc grinder, a technology that only one or two other companies have in India, grinds both surfaces simultaneously while maintaining flatness and parallelism.

Each grinder can be used for 10,000 to 15,000 components before it is replaced. This is single pass process and the entire grinding operations is completed in 20 seconds. The number of plates that can be ground at a time depends on their size.

The reeds are finishing using the rotary grinder and the vibro-finish machine, which is uses smooth pebbles to polish the product. This machine takes out the burrs and other surface imperfections. The finished product conforms to the highest standard of tolerance for surface finish, flatness and parallelism. This adherence to tight manufacturing tolerance ensures perfect assembly and minimum carry over of oil.

Self Sufficient

Gala is self sufficient for all its tooling needs. All the mould and dies used in the manufacture of valve plates and reeds are manufactured in-house. The company makes its dies using Mikano and Charmille wire-cut machines. These machines can produces dies with tolerance of within three to four microns.

The Charmilles machines, imported from Switzerland, is considered to be the best in the business and there are two such machines at the Wada facility. The machines can make dies in a variety of intricate shapes. The surface finish is very smooth and has Ra value of less that two months.

The finishing process of the reeds is an interesting operation and involves the use of maize, which helps to completely dry out the component before it can be shipped.

For its blanking operations, Gala Precision uses power presses of up to 250 tons capacity (2400 KN). The presses are attached to automatic decoiling, straightening and feeding arrangements.

A ‘Photo Sensor’ eliminates misblanking. The machines can be programmed for thickness ranging from 0.1 mm (0.0039”) to 6 mm (0.23”). Depending on the requirements the disc springs can either be phosphated, blackodised or plated.

The raw steel plates for blanking from procured from Sandvik, Sweden. Companies in Kolkata and Coimbatore also supply raw steel. All raw materials are stored in climate- controlled facilities where humidity levels are constantly monitored.

Senior manager, quality R Vaidyanathan believes that it is necessary to be consistent with quality. And true to this dictum adherence to quality is not restricted to one functional activity but applies to the entire business.

Gala Precision is beginning to move up in the value chain. From simple reeds and disc springs the company now makes variety of complex designs. In some cases of company delivers quality that is better and over that of the top sets benchmarks for quality, and this is done to a German customer.

Vaidyanathan says that Gala Precision is in the process of putting together its own strategy for quality that blends the best of Japan’s TPM/TQM and Six Sigma of the US. “We will have to evolve a system that is human centric and value-based,” he says.

Chief operating officer, BS Jalan says that the company’s challenge is not cost, quality or timely delivery but providing value to the customer. He expects Gala Precision to evolve towards becoming a solution provider.

Looking ahead, Jalan says the soon to be commissioned EOU becoming the hub for the manufacture of disc springs. “Capacity is a constraint and there are orders pending. Also this unit will evolve into a hub for PAC (precision auto component) activities and will include an R&D unit as well.” He says.

Jalan expects a three-fold increase in capacity over the next three years, when an Rs 70 crore investment plan is completed. Gala Precision makes 35 million reeds for compressor valves.