Embarking on a
vision, Gala Precision Technology has grown ten-fold in just nine years. With new product
launches, the company is set to conquer new markets
 It is a bit player but thinking big. Even
after almost two decades of being in business, the turnover of Gala Equipments and Gala
Springs, put together was barely Rs.1 crore. But when Kirit Gala took over from his father
and uncle in 1995 after calling it quits in the US where he was doing his PhD, he vowed
that existing for existence sake would lead the business nowhere. Says one of the
company’s senior managers: “ Ever since he has taken over the reins, he has
brought in professionalism and transparency in business and he has the knack of
identifying latent talent in his employees.”
Right through the meetings with the management and the
senior managers at its plant situated about 50 km from Thane, “professional
management” and “providing opportunities for the deserving” were the most
oft repeated lines. Such word for the present employer only goes to show that the
performance in the earlier years was not worth dwelling on.
When Gala took over in 1995, the turnover of both the
companies was Rs3.5 crore. “We embarked on a vision of growing ten – fold in ten
years,” recalls he who goes on to add, “but we achieved that in nine
years.” It closed the year to March 2005, with a turnover of around Rs.44 crore. Now
the company has set out on a similar mission: ‘Rs.350 crore by 2010.’ “We
are pretty confident in achieving that target and could even surpass with new product
launches and entering new markets, “ say Gala.
With Gala being gung-ho on the business potential, so is
a private equity firm GW capital of the US. The firm has decided to invest about Rs.50
crore in a phased manner in the now merged entity Gala Precision Technology. The company
is into the manufacture of critical engineering components for compressors and automotive
applications such as valves and springs. The plant located at Wada on the outskirts of
Mumbai rolls out valve plates, retainers and reeds for hermetic compressors and industrial
compressors. “The reeds have strong compressive stresses and higher depth of
penetration resulting in higher fatigue life that present reed suppliers,” says B.S.
Jalan, chief operating officer. Techumseh Products Co of the US, which sources its valve
requirements, states that Gala’s “valve reeds can easily be compared to the best
in the world”. Gala dishes out testimonials from one of its European customers which
states that the valves “for leading semi-hermetic compressor manufacturer in Europe
resulted in 5 per cent higher cooling capacity and 4.6 per cent power saving as compared
to their European valve suppliers.” The main customers are, LG Electrolux,
Emerson Climate Technologies (India) Limited , Subros (Denso), Carrier and Sundaram Clayton.
 Gala also rolls out disc
springs from the Wada plant. The oldest division specializes in right from the designing
of stacks to load testing and surface treatment. It supplies the import substitute product
to Sundaram Fastners whose products are fitted in combi-assembly supplied to General
Motors, Ford, Cummens and John Deere. Here the client include, ABB, GE industrial, Tisco,
Alstom, Godrej, Sundaram Fastners, windmill maker Vestas and Caterpillar to name a few.
The company recently set up another division to manufacture precision sheet metal
components for automotive applications such as brakes, clutches, electricals, horns, and
seating systems.
While these have been functioning as strategic business
units, the capital equipment division is where most of its products get the finess. These
machines are not just used for inhouse finishing of products such as descaling, deburring,
edge radiusing, polishing and finishing, but also hawked to industry. Called the mass
fishing systems, these are used for getting the finess on automotive and general
engineering products. The company has installed more than 2,000 machines for leading OEMS
and their vendors such as Hero Honda, Tata Motors, Bajaj and TVS Motors.
In term of markets share, Gala’s compressor valves
commands a 65 per cent share in the Indian Market and a 4 per cent share in the global
arena. In the case of disc springs, it holds a 50 percent share in India and a 2 per cent
overseas presence and in mass finishing machines it holds a 65 per cent market share in
India. Currently, according to Jalan, about 70 per cent of the company’s products are
sold in the domestic market with the rest wending their way into the US, Europe, China and
others parts of Asia. “By 2010, the ratio would be reversed with exports contributing
70 per cent of sales,” says a confident Gala.
Ask him about who would be your nearest competitor, Gala
says “though we are in the public domain we are known amongst our users. There may be
some garage operations, but we unhesitatingly saying that the kind of precision and
finishing that our products have, there is none to match. In fact, the testimonials say it
all. We are in some products on a par with international producers and in some even
better.” He adds that in a case of valve reeds, the company competes with Associated
Springs, of the US. For compressor valves, it is Hoerbiger of Austria and in disc springs
it is Mubia of Germany.
Expansion drive
Little wonder GW Capital has decided to pump in Rs 50
crore in the company. The first phase of Rs 15 crore would be utilized for capacity
expansion at the Wada plant, part financing the setting up of a manufacturing base in
Shanghai, China and opening up marketing offices in Europe and the US. The balance would
be utilized for further expansion and acquisitions informs Gala.
Sanjay Arte, partner, GW Capital and also on the board of
Gala Precision is pretty bullish on the company’s prospects. Says he: “we are
always on the look out for promising companies which are young in size. Precision
engineering is one area we were looking to invest in and this fitted the bill.” He
goes on to add that as private equity partners, his firm provides a lot of support in
terms of even management inputs. “Whether it is in business acquisition we always
stand by the company,” he says. This should stand Gala Precision in good stead as
acquisition is part of Gala’s gameplan, “particularly some European
Company”
 But what prompted Gala to look
at setting up manufacturing base in the dragon land? There the company valves and complete
valve assemblies. “We have looked at their market for two years now. A lot needs to
be done as far as their precision and finishing is concerned. We score over them on
product fatigue and life.’ Besides, he says, there is an import duty of 8 per cent on
valves and disc spring imported into China and there is restriction in outflow of
forex,” hence the need to set up a base there, a market which is growing by 10-12 per
cent annually.” The company expects in this first year to generate revenues of Rs 3
crore in the current year and go up to Rs 50 crore by 2009-10.
Over the next three year, Gala has earmarked Rs 150 crore
for investment in enhancing capacity and acquisition. GW capital has already committed Rs
50 crore and the balance he expects to come from debt and internal accruals. Going public
is not on his radar, as yet. “We’ll tap the public when we have proved a point.
By then we would have garnered a good valuation,” is all he says.
By 2010, Gala expects to touch Rs 350 crore with
additional investment in the later years. For the year to March 2005, the company closed
with a turnover of Rs 43 crore and a post tax profit of Rs 3 crore. The current year, he
expects to close with a topline of Rs 70 crore, “with a net margin of around 10 per
cent. The following year we would touch the three-figure mark in turnover.” If Gala
achieves his targets, then we could say precision pays.
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