‘Long term projection of Indian infrastructure sector is positive’

DISA develops and manufactures a complete range of metal casting production solutions for ferrous and non-ferrous foundry industries globally.

Viraj Naidu, Managing Director, DISA India Limited told Sandeep Menezes that construction segment will grow; it’s just that there has been slight slowdown in last two years due to the political situation.

 

Excerpts from the interview:

Since the equipment market is not growing, tell us about the increasing pricing pressures felt by vendors from OEMs?

The macro picture in the market is stagnant but for us it is not stagnant. Earlier we used to grow 30 to 40 per cent while this year’s growth will be around 15 to 20 per cent. Even this is significant in a capital equipment industry because when market is flat – the capital equipment segment normally goes down.
We have managed to hold on to our growth primarily due to the introduction of our new product range. Also some new products that are giving us access to completely newer markets.

Since Disa has gone in for localization of its products, the Rupee depreciation has come as an added opportunity. Comment.

Not exactly! The company with latest technology stands to gain. Also localization is not only transfer of rights; it is transfer of knowledge. To make something that looks similar is possible but to make something that works similar requires lot of knowledge transfer and also absorption of that knowledge by the workforce.
The drawings will provide the specifications but during manufacturing you will witness some deviations. But that deviation on the component level leads to deviation on the machines level which takes lots of experience to understand.
Since the last 30 years we have been absorbing new technology and localizing continuously, because we believe that in a growth market like India we can accelerate that growth further if the products are affordable. Currently everyone wants high-end technology, but the costs are prohibitive. If it can be made affordable then the market can shoot up faster.

Are you saying that bringing down costs is the only driver for localization of products or components?

Not at all! But costs is one of the reasons for localization. India is a lesser cost sensitive market vis-à-vis China. When volumes are small, the investment into large technologies becomes unviable. With volumes going up in India – it is driving higher level of technology acceptance which is not available with local suppliers but existing globally. Therefore localization attempts give further boost or accelerate the market. But the primary issue remains volumes or scale which makes technology more affordable through localization.

Which segments do you foresee higher growth in near future?

I feel construction is still doing well. What we are seeing is a slowdown in the last two years – that also in consumer oriented products like cars.

But even new infrastructure projects are not taking-off?

Infrastructure project cycles are much longer. It is not a one or two year cycle – big infrastructure companies don’t plan for short term periods of one or two years. Therefore by the time an infrastructure company executes a project – one recession period has come and gone.
Long term projection of Indian infrastructure sector is very positive. With a country of billion plus people who are beginning to earn more is a major growth drive. Construction industry will grow; it’s just that there has been slight slowdown in last two years, which is due to the political situation.

Post elections, tell us about the expected recovery in the market?

This year has been the slowest but from next year things should start picking up. Our prediction is that 2014 will see a picking-up, while 2015 will be better and 2016 shall witness a full fledged growth year again.

Does Disa have any capex plans to cater to this expected future growth?

We have two plants, one each at Tumkur and Hosurkote. At Hosurkote we completed our expansion last year which provided nearly 50 per cent additional capacity. In Tumkur, we are currently expanding by another 1,000 sq.m and it is expected to be completed by December. With both these expansions, the two sites will be completed with full land utilization. We have invested Rs4 crore at Hosurkote and Rs3 crore at Tumkur facilities.
We are currently exploring setting up a new greenfield plant and looking out for possible sites. Since we have historically been near Bangalore, we have to decide whether to set-up this new plant near Bangalore or go somewhere else. If the market picks-up, we would like the new plant to be completed in 2014.

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