Buoyed with the increased demand for off-highway vehicle wheels from overseas, Wheels India Ltd has decided to invest around Rs.70 crore on expanding its capacity while inking an technology agreement with a Japanese company to improve its productivity process, a top company official said.
"We will add capacity ahead of the demand. We will be adding around 10 lakh wheel production capacity in our plants here (Sriperumbuder and Chennai). Exports have been a strong growth driver in the first half of the year. Almost 30 percent of the sales growth contribution in the second quarter came from exports business with a strong traction for mining truck wheels," company managing director Srivats Ram told reporters here Thursday.
An off-highway vehicle is one that can be driven on paved, gravel and sandy surfaces. Such vehicles are used in motorsports and in industries like mining. Wheels India, a part of the TVS group is a global source for steel wheels for commercial vehicles, cars, utility vehicles and tractors.
Presently the company can roll out 1.3 crore wheels per year out of its six plants located here, Sriperumbudur, Pune, Rampur, Bawal and Pantnagar.
He said the fresh investment would be funded with a mix of debt and internal accruals.
The company will be completing the expansion over the next six-nine months.
Ram said the jump in the half yearly profit is contributed by export of wheels for 50-100 tonne dumpers. Wheels India is a significant player in this segment globally.
According to him, exports accounted for nearly 15 percent (around Rs.143 crore) of the total turnover.
He said the company has entered into a technical agreement with Japanese wheel manufacturer Topy Industries for improving the design, process and development of wheels for passenger cars.
"The Indian car market is dominated by manufacturers based out of Japan and Korea. Though they may launch their cars here, their design happens overseas. The technology tie up with Topy Industries will enable us to have a presence at the model design stage itself with the manufacturers," Ram said.
He ruled out any sourcing commitment by the Japanese company.
Wheels India is also into manufacturing of suspension systems for commercial vehicles and is planning grow the business further by targeting bus and truck operators, as well as ambulance operators.
Ram said the company retro-fits buses with its air suspension systems and the business contributes around five percent to the total turnover.
Speaking of the company's power sector business, he said the division is expected to break even this year.
"We got into that as a derisking and diversification activity leveraging our capability in welding," Ram said.
Wheels India closed the first half of the current fiscal with a turnover of Rs.956 crore and a net profit of Rs.18.17 crore, up from Rs.802 crore and Rs.7.77 crore posted during the corresponding period of the previous fiscal.
Speaking about the segmental sales Ram said around 22 percent is from passenger cars, 20 percent from tractors, construction and mining 15 percent and five percent from air suspension systems.
"More than fifty percent of our production goes for trucks and cars and the balance for other vehicles," Ram said.