With a shift in the global supply chain amid the pandemic and companies looking beyond China for sourcing, auto component firm Birla Precision Technologies Ltd is ramping up its capacity to tap emerging opportunities in India, according to a top company official.
To start with, the company plans to invest up to Rs 30 crore in the next one year to ramp up its drill manufacturing capacity under its cutting tools division.
"India is going to become quite a big player in the automotive supply chain globally. People are wanting to switch their supply chain more and more to India as time progresses, immediately coming out of COVID scenario," Birla Precision Technologies Chairman and MD Vedant Birla told PTI.
The anti-China sentiment in the wake of the pandemic, supply constraints faced during the peak of the health crisis and trade tension between China and the US have contributed to a shift in the global supply chain.
"In our cutting tools division, we are expanding the drills line...A lot of these (drills) are imported currently from China... So, we are expanding very aggressively because that will replace this Chinese influx of cheap drills, which are not of the required quality.
"We have (capacity of) about 12.5 lakh drills (per month). Now, we are adding another 3 lakhs (per month) which will come by June. There, we are putting in about Rs 9 crore initially," Birla said.
The company is looking at even further capacity expansion thereafter, he added.
"Then, we are looking at another 6 lakh of drills. So, we are looking at another Rs 25 crore after that. Till April of 2022, we should be investing, between working capital and capital expenditure, Rs 25-30 crore in the first (cutting tools) division, where we are facing the most aggressive demand," he added.
Commenting on the current market situation, he said, "Birla Precision is above pre-COVID levels actually. We would be about 10 per cent higher in the last two-three months. We foresee that the coming year is going to be very strong. All our customers are also giving a similar indication. So, it appears to be positive".
However, the auto industry is currently facing supply issue due to several factors, including a shortage of semiconductors, he added.
Before COVID, the auto industry was going through the worst recession in 20 years since it started monitoring the data and it was a completely demand issue.
"Now, it is the opposite," Birla said.On the revenue outlook for the company, he said, "Last (fiscal) year was a little bit of automotive recession, so it was a little bit low. The year before that, it was Rs 230-240 crore. After that, we came down to just below Rs 200 crore. Now, we should close better. The monthly trend is pre-COVID level. So, the next financial year we should be well above our 2018-19 achievement of Rs 240 crore".