In wake of the ongoing auto boom, the rising momentum in manufacturing activity in the four Gujarat Industrial Development Corporation (GIDC) areas in Rajkot is tangible. Almost every unit has wanted notices posted at the factory gates, to hire workers for shop floor etc.
A decade back Rajkot was considered to be the lowest cost producer for iron castings. It had a flourishing ecosystem in which castings manufactured using pig iron fed the diesel engine manufacturers who in turn supplied engines primarily used for agricultural purposes. There were 450 foundries manufacturing castings and supplying to around 200 diesel engine manufacturing units in Rajkot a decade ago, according to Rajkot Engineering Association (REA) estimates. Each diesel engine manufacturer was making around 40,000 units monthly to meet the growing demand. Today there are just 30-35 units producing diesel engine units and even large sized units do not make more than lakh units in a year.
This slump is largely attributed to cheap Chinese imports & has stalled diesel engine manufacturing activity in Rajkot, other engine manufacturers are straining under high tax and excise structure in addition to falling demand for low horsepower engines.
Brief history of Rajkot
RAJKOT Founded in 1612 by Thakur Saheb Vibhaji Ajoji Jadeja of Jadeja clan and Raju Sandhi. Vibhaji was grandson of Jam Sataji of Nawanagar, present day Jamnagar. During British Rule, it was a regional headquarter (Residency).
It has been seat of Jadeja Clan (Rajkot Branch) since then. Mahatma Gandhi spent his early years in Rajkot while his father was a Diwan to one of the Saurashtran Nawab, and the house where Gandhi lived is now a museum named Kaba Gandhi No Delo. He went to school in here (Alfred High School, now known as Mahatma Gandhi High School).
After Independence, it became the capital of Saurashtra State. It hosted the State Assembly for the state. Uchhrangrai N. Dhebar (known popularly as Dhebarbhai) was The First Chief Minister of Saurashtra State. Later, he was named as President of All India Congress Committee. Balwantbhai Mehta was The Second Chief Minister for the states. When states were created based on Spoken Languages, the city along with Saurashtra State was merged into newly formed Gujarat State. Rajkot is famous for its Bandhani Sarees, mirror-work, patch work, bead work, jewellery market and silk embroidery. The city hosts several of small scale manufacturing industries. Some of the industrial products that Rajkot is popular for Bearings, Diesel Engines (Largely exported to Africa and Middle East), Kitchen Knives and other cutting appliances
Pig iron prices and Rajkot's Industry:
There are several other bearings and forging companies awaiting recognition. Frequent cartel-like activity from a set of manufacturers is common. Last year pig iron prices shot up from Rs 10,000 to Rs 30,000 per ton, which the industry blamed on cartelization by pig iron suppliers. Pig iron is the key raw material for manufacturing castings.
One of the key trends in recent years has been shift to lighter weight materials by automobile manufacturers to bring down the overall weight of the vehicle. This means using more aluminum castings which in turn is leading to higher the demand for aluminum castings especially for passengers' cars.
Foundries in Rajkot were family managed outfits run by not so well educated first generation entrepreneurs, which were virtually assured of getting business from diesel engine manufacturers. This is no more the case and we are trying to raise awareness of the changing market realities and attracting new user industries for iron castings manufactured to the second generation.
Foundries which did not keep abreast of the changing market scenario have been sidelined by more forward looking peers who have started diversifying into auto component manufacturing or becoming suppliers by changing and adapting their product mix. It remains to be seen how far the effort at adapting to newer market realities will help foundry owners in Rajkot.
Overview of Bhavani Industries
Bhavani Industries was established in 1975 and is a single source supplier of some of the forged components for Maruti. It manufactures rocket valve springs, gear –boxes components and machining tools. Bhavani Industries, a castings and forgings manufacturer plans to raise its capacity by around 30 percent this year in anticipation of healthy order book from its OEM customers. The company is a major supplier to Maruti Udyog and Tata Motors and is currently utilizing around 80 percent of its capacity.
Robust OEM demand
The company has nine units spread over 25 acres located within Gujarat Industrial Development Corporation (GIDC) area in Rajkot and has a combined group turnover of around Rs 100 Crore. Domestic sales comprise 60 percent of its turnover with the remainder coming from exports to the UK and Italy. The company started out as a partnership firm and is even currently organized as group of companies comprising different units for various products. It employs around 500 people at various units in addition to several contract staff.
Solution provider mindset
OEMs have begun to reduce the number of suppliers they deal with as well as now expect them to participate during designing stage itself and provide assemblies instead of just individual parts. There is scope for value addition in this scenario though; he adds that business is getting very competitive leading to pressure on margins. Players who can provide precision parts at competitive rates while sticking to delivery schedules can survive and grow in this market.
Bhavani Industries is keen to be a single source supplier and move to high precision parts in order to remain a leading player in component sector. Auto components sector in India has moved to a higher growth trajectory and to operate profitably and be a tier I or a leading supplier to OEMs, requires solution provider's mindset and scale of operation of at least Rs 100 Crore or so, compared to Rs 10 to 25 Crore a decade ago.
Rajkot can be a good destination for castings, forgings and machining operations provided manufacturers are in tune with their customers (OEMs) needs and requirements and strive to be solution providers rather than just component manufacturers. Bhavani Industries is one of the oldest forging groups operating in Rajkot.
Amul Industries to double capacity, plans overseas unit in Europe
Amul Industries started its functions in 1988 as a small scale industry; today we are manufacturing 175 different types of Connecting Rods and are considered one of the biggest Connecting Rod manufacturers in India. Within a short span of 15 years the company has been able to touch turn over of 40 corers with more than 400 people working with it.
Amul Industries has embarked on a major expansion to double its capacities for connecting rods and crankshafts. The company is also in discussion with a European auto component manufacturer for a joint venture or an alliance to establish a manufacturing facility at a 'suitable' location in Europe.
Amul Industries plan to invest around Rs 150 Crore over the next three years to expand our current capacity and also set up facility in Europe to meet our objective of growing our current turnover of Rs 110 Crore by three times. On the domestic front, the company plans to invest around Rs 50 Crore this year to double its capacity for connecting rods to six lakh units and crankshafts manufacturing capacity from 1.2 million units to more than 2.4 million units.
Export thrust
Amul Industries is one of the major suppliers of connecting rods to major OEMs like Mahindra & Mahindra, Tata Motors, Eicher Motors, Ashok Leyland and currently has around 60 percent market share in connecting rods. Among its key customers is Iveco in the overseas market where Europe is a key destination.
The company derives around 50 percent of its turnover from commercial vehicle segment while 40 percent of its revenues come from products catering to tractor manufacturers. Sources indicated that the company which does not have a presence in the two- wheeler segment is eyeing this segment with the aim of being a full range connecting rod and crankshaft manufacturer.
On the HRD front, Amul Industries employs a large number of women on the shop floor making its one of the select group of component OEMs that does so. Currently Amul Industries have around 150 women among 600 odd employees at our facilities in Rajkot and their number will certainly grow.
Rajkot diesel engine sector gets shot in arm
The Rajkot diesel engine trade has got a new lease of life following copious rains across the nation that has created an unprecedented demand for diesel engines, especially of the Lister-Petter type used in agriculture applications. Five years ago, the city produced at least 5 lakh pieces of diesel engines per annum. But for the last few years, it was experiencing recession in terms of production and hardly managed to produce 1 lakh-50,000 pieces registering a steep decline in revenues too. "The trade, which was already hit hard by Chinese aggression, had to suffer even more due to lack of rain. The estimated turnover in terms of value, which ranged between Rs 450 Crore and Rs 500 Crore per annum before five years, suddenly slipped to Rs 150 Crore per annum," said Chandra Kant Patel, managing director of P M Diesel Ltd, Rajkot.
Availability of Skilled labor
Falling water levels in and around Rajkot have also played a part. Water, earlier available at 20-30 feet, is now hard to find even at 200 feet below ground level. This has led to decreased demand for existing engines while manufacturers have been slow to upgrade technology and facilities. Diesel engine manufacturers are steadily diversifying to other sectors, mainly auto components. This has led to spurt in demand for skilled shop floor workers.
Demand for shop floor workers is due to the high level of attrition where loyalty is making way for opportunism.
Foundry owners, who had a ready market for iron castings in the diesel engine manufacturer's arena, are looking for new user industries in and around Rajkot. This has led to a spurt in auto component manufacturing and forging, which also uses iron castings. Three of the key manufacturers in the auto components sector include Amul Industries, which manufactures connecting rods and crankshafts for commercial vehicles, Bhavani Industries, which is a forging major and gear manufacturer Sar Auto Products, which was acquired by Mahindra & Mahindra last year. However, the scenario seems to be changing.
A decade back Rajkot was considered to be the lowest cost producer for iron castings. It had a flourishing ecosystem in which castings manufactured using pig iron fed the diesel engine manufacturers who in turn supplied engines primarily used for agricultural purposes. There were 450 foundries manufacturing castings and supplying to around 200 diesel engine manufacturing units in Rajkot a decade ago, according to Rajkot Engineering Association (REA) estimates. Each diesel engine manufacturer was making around 40,000 units monthly to meet the growing demand. Today there are just 30-35 units producing diesel engine units and even large sized units do not make more than lakh units in a year.
This slump is largely attributed to cheap Chinese imports & has stalled diesel engine manufacturing activity in Rajkot, other engine manufacturers are straining under high tax and excise structure in addition to falling demand for low horsepower engines.
Brief history of Rajkot
RAJKOT Founded in 1612 by Thakur Saheb Vibhaji Ajoji Jadeja of Jadeja clan and Raju Sandhi. Vibhaji was grandson of Jam Sataji of Nawanagar, present day Jamnagar. During British Rule, it was a regional headquarter (Residency).
It has been seat of Jadeja Clan (Rajkot Branch) since then. Mahatma Gandhi spent his early years in Rajkot while his father was a Diwan to one of the Saurashtran Nawab, and the house where Gandhi lived is now a museum named Kaba Gandhi No Delo. He went to school in here (Alfred High School, now known as Mahatma Gandhi High School).
After Independence, it became the capital of Saurashtra State. It hosted the State Assembly for the state. Uchhrangrai N. Dhebar (known popularly as Dhebarbhai) was The First Chief Minister of Saurashtra State. Later, he was named as President of All India Congress Committee. Balwantbhai Mehta was The Second Chief Minister for the states. When states were created based on Spoken Languages, the city along with Saurashtra State was merged into newly formed Gujarat State. Rajkot is famous for its Bandhani Sarees, mirror-work, patch work, bead work, jewellery market and silk embroidery. The city hosts several of small scale manufacturing industries. Some of the industrial products that Rajkot is popular for Bearings, Diesel Engines (Largely exported to Africa and Middle East), Kitchen Knives and other cutting appliances
Pig iron prices and Rajkot's Industry:
There are several other bearings and forging companies awaiting recognition. Frequent cartel-like activity from a set of manufacturers is common. Last year pig iron prices shot up from Rs 10,000 to Rs 30,000 per ton, which the industry blamed on cartelization by pig iron suppliers. Pig iron is the key raw material for manufacturing castings.
One of the key trends in recent years has been shift to lighter weight materials by automobile manufacturers to bring down the overall weight of the vehicle. This means using more aluminum castings which in turn is leading to higher the demand for aluminum castings especially for passengers' cars.
Foundries in Rajkot were family managed outfits run by not so well educated first generation entrepreneurs, which were virtually assured of getting business from diesel engine manufacturers. This is no more the case and we are trying to raise awareness of the changing market realities and attracting new user industries for iron castings manufactured to the second generation.
Foundries which did not keep abreast of the changing market scenario have been sidelined by more forward looking peers who have started diversifying into auto component manufacturing or becoming suppliers by changing and adapting their product mix. It remains to be seen how far the effort at adapting to newer market realities will help foundry owners in Rajkot.
Overview of Bhavani Industries
Bhavani Industries was established in 1975 and is a single source supplier of some of the forged components for Maruti. It manufactures rocket valve springs, gear –boxes components and machining tools. Bhavani Industries, a castings and forgings manufacturer plans to raise its capacity by around 30 percent this year in anticipation of healthy order book from its OEM customers. The company is a major supplier to Maruti Udyog and Tata Motors and is currently utilizing around 80 percent of its capacity.
Robust OEM demand
The company has nine units spread over 25 acres located within Gujarat Industrial Development Corporation (GIDC) area in Rajkot and has a combined group turnover of around Rs 100 Crore. Domestic sales comprise 60 percent of its turnover with the remainder coming from exports to the UK and Italy. The company started out as a partnership firm and is even currently organized as group of companies comprising different units for various products. It employs around 500 people at various units in addition to several contract staff.
Solution provider mindset
OEMs have begun to reduce the number of suppliers they deal with as well as now expect them to participate during designing stage itself and provide assemblies instead of just individual parts. There is scope for value addition in this scenario though; he adds that business is getting very competitive leading to pressure on margins. Players who can provide precision parts at competitive rates while sticking to delivery schedules can survive and grow in this market.
Bhavani Industries is keen to be a single source supplier and move to high precision parts in order to remain a leading player in component sector. Auto components sector in India has moved to a higher growth trajectory and to operate profitably and be a tier I or a leading supplier to OEMs, requires solution provider's mindset and scale of operation of at least Rs 100 Crore or so, compared to Rs 10 to 25 Crore a decade ago.
Rajkot can be a good destination for castings, forgings and machining operations provided manufacturers are in tune with their customers (OEMs) needs and requirements and strive to be solution providers rather than just component manufacturers. Bhavani Industries is one of the oldest forging groups operating in Rajkot.
Amul Industries to double capacity, plans overseas unit in Europe
Amul Industries started its functions in 1988 as a small scale industry; today we are manufacturing 175 different types of Connecting Rods and are considered one of the biggest Connecting Rod manufacturers in India. Within a short span of 15 years the company has been able to touch turn over of 40 corers with more than 400 people working with it.
Amul Industries has embarked on a major expansion to double its capacities for connecting rods and crankshafts. The company is also in discussion with a European auto component manufacturer for a joint venture or an alliance to establish a manufacturing facility at a 'suitable' location in Europe.
Amul Industries plan to invest around Rs 150 Crore over the next three years to expand our current capacity and also set up facility in Europe to meet our objective of growing our current turnover of Rs 110 Crore by three times. On the domestic front, the company plans to invest around Rs 50 Crore this year to double its capacity for connecting rods to six lakh units and crankshafts manufacturing capacity from 1.2 million units to more than 2.4 million units.
Export thrust
Amul Industries is one of the major suppliers of connecting rods to major OEMs like Mahindra & Mahindra, Tata Motors, Eicher Motors, Ashok Leyland and currently has around 60 percent market share in connecting rods. Among its key customers is Iveco in the overseas market where Europe is a key destination.
The company derives around 50 percent of its turnover from commercial vehicle segment while 40 percent of its revenues come from products catering to tractor manufacturers. Sources indicated that the company which does not have a presence in the two- wheeler segment is eyeing this segment with the aim of being a full range connecting rod and crankshaft manufacturer.
On the HRD front, Amul Industries employs a large number of women on the shop floor making its one of the select group of component OEMs that does so. Currently Amul Industries have around 150 women among 600 odd employees at our facilities in Rajkot and their number will certainly grow.
Rajkot diesel engine sector gets shot in arm
The Rajkot diesel engine trade has got a new lease of life following copious rains across the nation that has created an unprecedented demand for diesel engines, especially of the Lister-Petter type used in agriculture applications. Five years ago, the city produced at least 5 lakh pieces of diesel engines per annum. But for the last few years, it was experiencing recession in terms of production and hardly managed to produce 1 lakh-50,000 pieces registering a steep decline in revenues too. "The trade, which was already hit hard by Chinese aggression, had to suffer even more due to lack of rain. The estimated turnover in terms of value, which ranged between Rs 450 Crore and Rs 500 Crore per annum before five years, suddenly slipped to Rs 150 Crore per annum," said Chandra Kant Patel, managing director of P M Diesel Ltd, Rajkot.
Availability of Skilled labor
Falling water levels in and around Rajkot have also played a part. Water, earlier available at 20-30 feet, is now hard to find even at 200 feet below ground level. This has led to decreased demand for existing engines while manufacturers have been slow to upgrade technology and facilities. Diesel engine manufacturers are steadily diversifying to other sectors, mainly auto components. This has led to spurt in demand for skilled shop floor workers.
Demand for shop floor workers is due to the high level of attrition where loyalty is making way for opportunism.
Foundry owners, who had a ready market for iron castings in the diesel engine manufacturer's arena, are looking for new user industries in and around Rajkot. This has led to a spurt in auto component manufacturing and forging, which also uses iron castings. Three of the key manufacturers in the auto components sector include Amul Industries, which manufactures connecting rods and crankshafts for commercial vehicles, Bhavani Industries, which is a forging major and gear manufacturer Sar Auto Products, which was acquired by Mahindra & Mahindra last year. However, the scenario seems to be changing.