Bus division will see an uptick in FY17, says JBM's ED

A: JBM Auto primarily focuses on the passenger vehicles segment, commercial vehicles (CV) segment and the farm equipment segment. And about 65-70 percent sales comes from passenger cars and the rest is coming from the other two areas. So, today, a few of our customers like Mahindra and Mahindra, Renault Nissan who are the key customers in this company, Ford are doing well and we have substantial business with these customers. They are our key customers even in the commercial vehicle market. Daimler, Volvo, Eicher are doing pretty well. So, the company is benefitting from that and we are able to scale up on that front and similarly, the profitability of the company would also get enhanced. Our target for this year is a minimum of Rs 2,000 crore in FY17.

Nigel: So close to 25 percent topline growth for this year?

A: 30 percent.

Nigel: You were talking about various clients. Who is your biggest client? Is Mahindra your biggest client?

A: In this company actually, it is quite well distributed among the passenger car customers whether it is Mahindra or Renualt Nissan or Daimler and Ford. So, all are equally important for us.

Reema: You said 70 percent if passenger vehicles and the rest is CV as well as farm equipment. What about the bus division? Is that not a focus area and how much does it contribute? Has there been any update that you would like to tell us?

A: Bus division, as you know, has started this year only and the first quarter of this financial year was the first quarter of the sales for the bus division where we delivered our vehicles and bus division definitely will be having a very good uptick in this year and we are seeing that it will contribute significantly in this calendar year and also we will be looking at getting orders for the next financial year as well. We are working quite significantly in a big way on our electric vehicles and in the month of March, we would be rolling out our electric buses.

We see a lot of traction for those products also because the customers across the country are really focusing on green energy and the kind of operating cost optimisation which you get with these vehicles is phenomenal. About 70 percent cost reduction in the operating cost for all the bus operators which is very important for them over a period of 10 years of life cycle which they have.

Nigel: What about margins? In the last quarter, your margins fell to sub-10 percent. Why was there such a big fall in margins and also you are giving us a guidance of around Rs 2,000 crore on the topline. Will your margins stabilise at around 12-12.5 percent?

A: As you rightly said that the FY16 was not a right year since many of our new plant got productionised. So they had to stabilise. So that impact was there and if I take the right base as FY15, so definitely we look forward to do better than FY15 in FY17.

Reema: In the last three months, could you tell us if the company has won any new clients, if you have won any orders for your bus division? Tell us how things have changed materially for the company in the last three months and if you are expecting any material change in the next three?

A: Definitely, we have got multiple new orders.

Reema: Can you quantify them?

A: We have pretty good orders for our component division where we have more than about Rs 200 crore of orders which we have received in this financial year from different customers for our components and Rs about 30-40 crore for our tooling division which has come up which would be adding to the topline in this financial year itself. And similarly, in the bus division, we are already in the tendering process for few of our big tenders which will be coming out, so I will not be able to spell out too much on that, but we are making very good progress and by the time results would be coming out, next month, we will be able to share something significant with you.

Reema: So, what you are saying is the order wins in the first six months of this financial year are Rs 200 crore for the auto component business and about Rs 30-40 crore for your tooling business?

A: Correct.

Nigel: Could you tell us what is your capacity utilisation currently? What kind of capacities are you working with and at optimum capacity utilisations, what can your numbers look like? Is there any capex that you are planning on undertaking? Are you planning on adding capacities in various plants?

A: As I said, in the last three years, we have added about three new plants and a lot of expansion has taken place. So, this year is a year of consolidation for us for all the new capacities we have already created. So, on an average, JBM Auto is having about 70 percent capacity utilisation. Our target is that that in this financial year, we will be taking that to more than 80 percent and definitely, that would be enhancing the bottomline with the efficiencies that we are trying to bring in. There is a lot of focus on light-weighting and value engineering which is there and with that we have been able to really get substantial benefits.

In many of our new orders, we are working with the customers, we are really working from an art to part perspective where we are reducing the time to market and we are taking the complete design ownership to manufacturing. So, the customers feel more confident working with JBM and definitely, time to market in today’s scenario is a very important aspect how quickly they can launch their models. So, that is something that we are trying to contribute to. Hence, being a vertically integrated organisation where we are having about 300 people in our design vertical for buses as well as for the component tooling division which is really helping the organisation to create a very strong backbone.