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.