Over three decades ago, when Dr Neelkanth Kalyani set up Kalyani Forge in Pune, the fledgling company was pretty much left to its own devices so that focus could be devoted to other, older group companies. Without much capital coming in, it was up to the start-up to hone and enhance its knowledge and resource base.
Last year, KFL reported a sales turnover of Rs 243 crore, and Viraj Gaurishankar Kalyani, its 25-year-old Executive Director says the company’s transformation to meet the demands of the global automotive industry for technologically superior products at best prices has begun.
“The need for transformation arose from changing market realities and a wave of change that we noticed in our country. I always benchmark with global companies in diverse industries. I joined the family business because I wanted to change it and through it, make a positive impact in our country,” says Mr Kalyani.
The existing model, he adds, worked well for the previous decade but goals today have grown manifold. In tandem with this, the company is focusing on quality through engineering in processes and improving Cpk (a measure of process capacity) levels.
Building change
Mr Kalyani says, “The major initiatives I am focussing on are organisation architecture and system enhancement, culture development, strategic decision-making and customer orientation at Kalyani Forge. These may sound like buzzwords, but there are clear actions happening deep inside the company to implement these programmes.”
Incorporated as Ellora Engineering Co Pvt Ltd in 1979, Kalyani Forge commenced commercial production in 1981 but was renamed only in 1992. It was set up as part of the group’s strategy to enter the niche high precision forgings market, while Bharat Forge, which was established 18 years earlier by the late Dr Kalyani, catered to the large forgings market. In 2000, his mother Rohini joined the business and set about expanding it.
Mr Kalyani says, “We set up a warm forging division at a time when the technology was in nascent not just in India but the world.”
The company invested in new lines of business and things were looking up when the global recession struck in 2009, forcing KFL to hold off growth plans.
The next couple of years were spent in recovering demand and getting back to growth. In fact, KFL has reported a loss of Rs 2.6 crore in its latest turnover figures.
By 2011, the industry had become attractive to new entrants and competition increased along with price pressures.
Despite this, KFL has improved its short-term results but needs to develop a long-term self-sustaining growth model to withstand any external shocks.
GenX at the helm
A graduate of the Jerome Fisher Programme in Management and Technology at the University of Pennsylvania, Mr Kalyani joined the precision-forged and machined automobile components manufacturer as Executive Vice-President in 2012 and was elevated to Executive Director in mid-2013.
Since then, the company has undertaken various growth initiatives, including energy efficiency projects and facility upgrading. It is also going in for low-cost production through automation, besides focussing on value addition in manufacturing and design.
“We are getting a strategy in place to fine-tune the system for the next five to 10 years. That will help us move forward in a clear direction. We will be in a position to decide what to do. We may not pursue some businesses or may phase out the ones that reach the end of their lifecycle,” Mr Kalyani says.
Hard times, hard decisions
Some of these changes may have come a tad too soon. “In early 2013, we decentralised radically. In hindsight, I admit it was too sudden. Once we realised the gaps in functional excellence, we took a few steps back and have now settled at a more relevant structure that balances autonomy and control while building functional excellence. Structures are not set in stone, and we have to evolve them with a watchful eye on how the organisation is achieving new targets,” he adds.
They also involved taking some hard decisions, including saying no to a lot of things, beginning with many outdated practices considered sacred, clients who didn’t fit our strategy or long-term prospects even though it meant giving up some revenue in the short term. KFL has also decided to continue investing in building future capabilities and programmes with long-term returns.
At present, the company is seeing its biggest capex infusion yet for capacity expansion of the automotive division, with Rs 200 crore being invested in phases till 2018. The first phase, which started in 2015, is already nearing completion.
“We are expanding our machining division by 25 per cent by the end of this financial year. We have entered new product lines in transmission, engine products and in construction and mining. These are expected to grow over the coming years,” he says.
The machining division, a decade-and-a-half old, is comparatively smaller than the company’s forging division but there is enough scope for growth as it occupies only 20 per cent of the land on the Sanaswadi campus near Pune. The company will, of course, maintain focus on its core competence as 70 per cent of its business comes from automotive components.
He adds, “I am bullish about the automobile sector in the medium-to-long term. Fundamentally, there is a strong growth story here. I am positive India will emerge as the world’s number one or number two in the automobile market in 20 years.”
(The article has been edited for a factual error. The report, in the first line, said Dr Baba Kalyani set up Kalyani Forge in Pune; it should have been Dr Neelkanth Kalyani.)
