‘Bullish on commercial vehicle segment till 2020’

Good times are back for them. And, they are relishing it. Why not? After all, the industries they are in are doing well. Srivats Ram , MD, Wheels India Ltd., shares his perspective of the business environment at the moment. Excerpts:

How do you see the current business environment?

For the first time in many years, we are seeing a demand in all the segments we are present. What is interesting is that all the cyclical industries we are in seem to be on an upswing, both in India and globally, at the same time. The businesses in all our traditional segments are stronger than they have been in the last six years. Volumes are at an all-time peak.

Driven by replacement demand and overloading restrictions, the commercial vehicle (CV) segment has done well in 2017-18. Our customers are aggressive with their plans. We are bullish on the CV segment till 2020 as most of the manufacturers are going flat out.

Demand in construction equipment space has almost been entirely due to the government’s initiatives in road building and the rapid pace of construction. Government’s pro-agriculture policy is driving the demand for tractors, and we are doing well in that segment as well.

However, these are cyclical businesses. Hence, I would not get too carried away, as what goes up comes down. I only hope that they don’t come down all at the same time.

You had diversified into a number of new segments. How are the prospects in these?

All the new diversified segments we have been into in the last few years are doing well currently.

Mining segment is growing globally. We expect the wind energy sector to be better this year. We have just entered another new segment with the roll out in December 2017 of bogie bolster and block for Indian Railways. We are building components for safer systems that the government is focussing on.

How are things on the export side?

We have been struggling on the exports front for a few years. However, we managed a 10% growth last year in the exports business, thanks to a recovery in the overseas markets in the second half. We should see a strong growth in exports this year and expect it to be more than what we have seen in the last financial year, with the growth coming largely from construction and mining segments and the windmill component.

Will the capex programme result in greenfield project?

Right now, the markets are quite hot. We are running to full capacity in all our business segments. The speed at which the increase in demand has shot up has necessitated the increased capex this year. In the past, we have typically followed a pattern of once a year capex.

While this has already increased by 40-50% (to Rs. 122 crore) for this year, it may not be the only capex investment of the year given the huge demand. We had originally planned for greenfield. But we would have let down customers if we waited for greenfield. That’s the reason why we have currently gone in for a brownfield expansion as there is an urgent need for speed of implementation so that we can meet the immediate on-hand demand from customers.

Will you be looking at a greenfield plant in the medium term?

Demand has gone up significantly in the automotive space. We have to meet their expectations.

We are driven by customers, and as long as customers grow, we need to invest for them. I will be surprised if we do not go for a greenfield plant in the next three years. We are already seriously examining the possibility of a greenfield investment.

We are driven by customers, and as long as they grow, we need to invest for them