Taming The Dragon: SFL's China Foray

Sundram Fasteners's successful China foray will give confidence to other companies.

Regards.

- Dilip.

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Source: Economic Times, Chennai, July 7, 2006

Taming The Dragon: SFL's China Foray

V. Balasubramanian

"My job is to go where there is a growth opportunity. Whether I succeed or not is a different thing altogether. I hope I will succeed and I will do everything to see that I succeed."

These were the words of Suresh Krishna, Chairman and MD, Sundram Fasteners, when his company moved into that most-challenging market, China. He was being closely watched by other industry captains whose anxiety stemmed from the fact that it was the first project by the Indian engineering industry in China.

It was also the first venture for the TVS Group in China. Well, SFL and Krishna have not disappointed themselves and the industry barons. The project was executed as per schedule and it's working over the last two years is in tune with expectations. And SFL's move germinated at a time when the industry was hotly debating the manufacturing power of – and in – Dragon Land. Krishna , an out-of-the-box thinker, quietly studied the market for two years. Plus, with an office in Shanghai , his company also tested the highly competitive market with exports.

Finally, in March 2003, he decided to 'crack' the market and the company's fully-owned Chinese subsidiary signed an MoU for settling up the project in Haiyan Economic Development Zone located 100 km off Shanghai. The initial pump-in was $ 5 million and they expect to step that up to $ 12.5 million. Krishna is known for his passion for quality and business excellence. He decided to go global only after SFL managed to stepped up its exports and emerged as the most cost-competitive fastener manufacturer globally.

Despite the bhoomi puja being done in July 2003, it did not have a smooth take-off. SFL lost precious four months due to the outbreak of the deadly Sars disease and was forced to delay the deputation of officials and construction of the plant. SFL also faced difficult times operating in a totally non-English speaking market with sharp differences in religion, custom, culture and food habits. "But, we took them as a challenge and the project went on stream within eight months in May 2004," recalls a senior official.

Initially, it did sales of Rs.1 crore a month which soon moved up to Rs.1.5 crore per month. Officials said it began with exports to the US and European markets followed by supplies to MNCs operating in China. It is now ready to supply to the Chinese companies.

Even while it was probing the Chinese market, SFL in December 2003 acquired the precision forgings business of Dana Spicer Europe and gained a major foothold in Europe. This year, SFL acquired German's leading fastener manufacturer, Peiner, a subsidiary of Textron. Says Krishna: "The acquisitions and investments are part of the company's globilisation strategy and to gain access to new customers and markets. We want to have beachheads in different markets to move forward."

During the year to March 31, 2006, SFL reported a turnover of Rs.1,063 crore. Export sales at Rs.323 crore constituted 30% of total sales. If you didn't know, SFL is the second largest exporter of auto components after Bharat Forge. Moreover, Suresh Krishna is of the firm view that like IT, India is sitting on a goldmine of outsourcing opportunity in auto components with automobile manufacturers in the US and Europe facing cost pressure.

"They have started sourcing components and suppliers from India and China. The next step will be contract manufacturing in the two countries. SFL wants to take advantage of this snowballing effect of outsourcing," he has pointed out.