‘We plan to expand and grow over next couple of years’

Kalyani Forge Ltd is one of the leaders in manufacturing of close tolerance precision forgings. The company has constantly innovated in hot, warm and cold forging technology over 30 years.

Viraj G Kalyani, Executive Vice President – Kalyani Forge told Renu Rajaram that there is some pressure on costs due to increases in power and labor costs.
Excerpts from the interview:

 

What is Kalyani Forge’s future business strategy? There were recent reports of the company intending to invest Rs.200 crore to add capacity and enhance efficiency. Comment.

Yes, we have plans to expand and grow over the next couple of years. And investment would be required to modernize current facilities, increase value adding capacity and invest in new areas like larger forgings.

Kalyani Forge had earlier planned to ensure low-cost production through automation while also adopting a lean manufacturing strategy to reduce waste. What has been the outcome of these initiatives?
We have had positive results in terms of a change in culture, where each improvement at any level triggers a new set of problems which can be addressed and resolved in a virtuous cycle. Our productivity has improved and people spend more time on work that engages them. There has also been a visible change on shop-floors in terms of workplace organization. But we understand that there is no end to the improvements and we have a lot more potential.

While steel prices are stable, some of the other conversion costs are increasing like power and labour. Comment.
There is some pressure on costs due to increases in power and labor costs. This only increases our push to improve energy and labor productivity. However whatever steps we take are for sustainable growth, not just to make the numbers for the quarter.

There is a need for technology upgrade in forging and manufacturing across India. But why isn’t there much initiatives – both on governmental and industry fronts?

While barriers to entry in the forging industry may be low, there are high barriers to scale up as it is quite capital intensive. Hence we have a huge number of small players and only a handful of medium and large players. I think outdated labor laws have contributed to the lack of technology upgrades.

There is less focus on better working conditions and more on securing employment. This creates disincentives smaller forge shops from investing in technology. What these laws do is they also encourage larger companies to use technology to replace rather than enable people.

Of course, some sops from the government wouldn’t hurt, but that doesn’t address the root cause.
What are the recent technological trends across the forging industry?
There are advancements in cold forging, an area where Kalyani Forge is playing a larger role today. This technology has higher material yields. There are also ongoing improvements in the use of IT to improve production, design and engineering processes.

Currently the global slowdown has slightly weakened exports in the forging industry. In the near future, do you foresee signs of revival? How has the DEPB incentives helped to encourage exports?

On the contrary we have noticed a revival in exports and encouraging interest from global customers. This should only improve further, especially if the rupee remains at the current level and Europe, US and Japan steadily grow out of their past recession. DEPB incentives give a good boost to cash flows and encourage exports. What would help is a leaner, user-friendly process of availing these!

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