Excerpts from the meet

Backed by the strong automotive boom in the global market Igarashi Motors made a remarkable sales and profit during the FY’05. However, the steep rise in steel prices coupled with copper and plastic prices, had affected the operating profit. But the severe cost control measures undertaken by the company had facilitated them to post a higher profit over the previous year. Speaking at the meeting Mukand said,"confidence among customers is building on the company’s capabilities due to the experiences acquired in competitiveness, responsiveness and commitment to quality over the past decade in the field of DC Motors and its sub assemblies". He also told that they are expecting the trend to continue to another four to five years.

In order to take off the creeping demand, the company has created separate manufacturing modules and noting that automotive industry gestation periods could be up to 3 years, the company has created the platforms suitable for scalability. The company makes motors and motor sub-assemblies for the automotive industry at its plant at the Madras Export Processing Zone.

The higher turnover was mainly because of new demand from the existing customer and global competitiveness from the developed countries, who are sourcing components from the country. Over the past decade the company has produced nearly 75 million pieces of electric motors. Igarashi exports its products to Germany, France, USA and plans to export to Brazil and Thailand in the current fiscal. Out of the top 10 global system integrators, Igarashi Motors was working with four- Bosch, Delphi, Visteon and Arvin Meritor.

During the previous fiscal, all the commodities including steel, copper and plastic witnessed a steep surge in prices. Coupled with that the availability of steel was also limited, inturn prompted the price to surge. Further, the sharp rise in crude oil prices had triggered the airfreight costs to up significantly. Mukand said, Igarashi Motors spent around $2 million for airfreight costs, for bringing the raw components and other products into the country. The continuous strategic alliances allied with quality control measures will lead to healthy performance in the forward years. The company is also in the process of upgrading from QS 9000 to TS 16949, the new process based quality system which will inturn translate the quality model from design of products and process to all elements of the organization.

The component industry needs continuous investments in order to face the creeping the demand from the automobile majors. During the previous fiscal the company incurred a capital expenditure of Rs 16 crore, which includes setting up off infrastructure tooling system of 30,000 sq ft. For the current financial year, the company envisages a plan of Rs 30 crore. It may be noted that during FY’05 the company expanded its capacity by 4 million pieces of motors. In the current fiscal also, the company expects a same level of capacity expansion.

During the FY’05, the company sales increased by 78% to Rs 90.3 as against Rs 50.56 crore in the previous year. Despite implementing severe cost measures, the mounting inputs costs had enabled the company to post lower profit for the previous fiscal. Though the sales volume for electric micro motor and rotor assembly has increased remarkably in FY’05, except electric micro motor the price realization for rotor assembly has come down significantly.

One shareholder queried to Mukand about the business model of Igarashi Motors in the forward years. The Managing Directors replied, the company wanted to become a full service supplier related to motors to the global automotive industry, following the robust growth witnessed in the global auto industry. The current trend in the global automotive industry was for suppliers who would design, engineer and produce a particular part.

On to a question related to growth of the company, the Managing Director replied that they expect a growth of 50-60% in the next five years.

For a question on ratio of sales between export and domestic market, he told that at present the company’s sales constitutes about 95% of export and 5% of domestic market. But he foresees that in another 5 years the ratio would change to 75% of export and 25% of domestic market.