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 directors 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 todays
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 combiscrews Sundram Fasterners
supplies to General Motors and John Deere, Gala Precisions 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 Indias 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 companys
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 Precisions
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 Japans
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
companys 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. |