Interview with Rohit Saboo, President & CEO, National Engineering Industries Limited (NEI)

You make different kinds of bearings. Which are the industries you primarily cater to?

Approximately 65pc of our turnover comes from the auto sector, another  25pc comes from railways and the remaining 10pc comes from the industrial sector. Out of the 65pc which comes from auto, 80pc goes to OEMs and 20pc goes to aftermarket producers. Earlier we were more into the aftermarket sector but we are moving more and more into the OEM sector.

Do you continue to have technical collaborations with some companies for a specific kind of bearings?

We have two separate collaborations. One is with NTN of Japan and one is with Brenco of USA. The Brenco collaboration is for a particular wheel bearing used in the railway back ends. All other bearings are covered with NTN of Japan. These are technical collaborations only. The design of the bearings is theirs while all the other development and applications we have do on our own.

You started a plant in September in Savli, Gujarat. Can you tell me its capacity and the kind of bearings manufactured there?

The Gujarat plant will be completed in 2016. It will have a capacity of 50-60 million bearings. This will add 50pc capacity to our existing capacity. We are currently doing 100 million bearings as of now. The plant was set up with an investment of Rs 500 crores and it will employ approximately 1000 people. It is a fully automated plant. We are trying to cater to the automotive players who are present in Gujarat. We are also trying to make use of the proximity to the Mundra port and use that as an export hub. Around 40-50pc of our production from there will be exported.

Your company has plants in Rajasthan and Haryana. Is Gujarat offering you the right industrial climate for Investment? What drew you to Gujarat?

It was not really the Gujarat angle more so it was due to our customers going to Gujarat. The other reason was that we have to be near to our component suppliers like forgings, rings and turning suppliers. One of the hubs is at Jaipur and the other hub is at Rajkot. Another reason was that the proximity to Mundra port for exports. These are the reasons we set up a plant in Gujarat. There was no government angle to it.

Your exports have steadily increased over the last few years. It is now at 16pc of your revenues. What kind of bearings are being exported and to which market? Are the US and EU markets big for bearings? 

This year approximately 20pc of our turnover is coming from exports and we hope to add another 5pc to this by next year. We export a lot of railway bearings, taper roller bearings and ball bearings. Our number one country to whom we export is the US, number 2 is Germany, number 3 is South Africa and number 4 is Brazil. We are present in 26 countries. Those would be fairly small as 74pc of our turnover comes from the four countries I mentioned earlier.

Many component players have been looking at acquisitions abroad. Why is your company not doing that?

The bearing industry is a fairly small community, especially the high-quality bearing manufacturers. You will find a bearing manufacturer a-dime-a-dozen in China but we don’t want to go down that path. The high-quality bearing manufacturers are a very small industry and fairly consolidated so it is difficult to find a good company to acquire. 

What are the advantages that you offer, is it the cost or quality? What is your USP?

We provide value to our customers. We are a flexible company and we listen to our customers. Our philosophy is that we follow the 4Ds which are Design, Development, Deliver and Dialogue. These are the 4Ds with which we engage with our customers. We are the most flexible manufacturers in the bearing space who listen to their customers and do as they want. We feel that we provide the maximum value to the customers and that is our main strength.

You have partnered with ConMet of USA to manufacture pre set hub assemblies. Is this a value addition? Are there more value additions you are looking at?

It is actually a hub on which the wheel goes. Earlier we were providing only the bearing. Now we are providing the entire hub on the pre set form. Which will give a much better life for the product and it is relatively maintenance free. It is a preset technology patented by Conmet. Therefore the warranty levels are much higher. It also gives a better life and again is relatively maintenance free. These are currently being manufactured in our Jaipur plant. Right now the Jaipur plant is supplying to Indian customers only. The same products are being manufactured by Conmet in the US. Our present capacity meets demands of Indian customers. We are not thinking at exporting this product. If in the future demand increases we will expand our capacity. We are also looking at other value additions. We are in talks with some tractor manufacturers where we are providing some value added products because the bearing goes in a sub assembly and this is used in the tractor. So we want to provide the sub assembly to the tractor manufacture so that it can be fit directly into the tractor and don’t have to bother about pressing the bearings and it will save their time. Similarly we are talking to other companies as well for such value added products. Scope-wise we are trying to find a niche as to what value we can add to our customers. For example if the company has to press the bearing in the hub then we do that job for the customer to provide value additions to the customer and help them save on man power, cycle time, etc. I think we are looking at more products like this.   

I have seen that you have more or less covered most of the OEMs in India. A few car companies have not been covered. Is there a scope there or do they have their own dedicated bearings suppliers?

There are three kinds of customers-- one is where we supply directly, the second is where we supply to the aggregate manufacturer where they make the aggregate and then supply it to the OEMs and the third where we supply to companies assembling cars here. As the volumes keep on growing they will have to look at other suppliers. All the companies not buying from us will have to look at other suppliers. We are in touch with them and some day or the other we will supply to them.

How do you perceive your company’s growth in the years to come? I have noticed that exports have grown considerably since 2009 by almost 7 times. Do you see revenues also growing at a steady pace and what about exports also?

We have envisaged that by 2020 we should be a 1 billion dollar company. We are working towards that and it means that we have to grow more than 20pc in our business. This year we are growing less than 20pc but the last four years have had a CAGR of 17.7pc. We feel that if we do the right things, approach the customers and get the export market we will be very close to achieving our target. At a situation where we touch the 1 billion dollar mark exports will contribute 25-35pc. By 2016 we will have the Gujarat plant fully operational. After that we will have to look to set up a new plant. We have already bought some land 35kms west of Jaipur which could possibly be our fifth plant. Right now we are not thinking that we will make some huge plant. The Gujarat plant itself is quite big and will produce 50-60 million bearings annually. The new plant will definitely come before 2020. After 2016 we have to definitely construct a new plant. At this point the capacities have not been determined but hopefully by mid 2015 we will be able to freeze that. We are progressing in a modular form. So we will make one plant, then fill it up, then make another and do the same.