After a better than expected FY16 performance auto manufacturer Force Motors is on the fast track of growth with the company announcing expansion with an investment of Rs 300 crore into new facilities and product enhancement.
Prasan Firodia, MD, Force Motors is targeting a growth in the range of 15-20 per cent growth in this new financial year on the back of better monsoon, performance of the rural economy and growth in multi-utility vehicles.
"Our vehicle business has done very well last year. Though we have several challenges like emission issues, regulatory and permit last year, we still managed to have a very good growth on our vehicle business. Similarly our component business has done very well and the tooling business is also growing. This has led to a fairly good year for us. Considering current market situation, getting 32 per cent growth is quite phenomenal, said Firodia.
For the fiscal year 2015-16, the company's total income from operations stood at Rs 910.77 crore versus Rs 702.93 crore, indicating a growth of 28 per cent YoY. The company posted a growth of 77 per cent in net profit that stood at Rs 179.65 crore compared with Rs 101.36 crore in fiscal 2015. The impact of this was evident on stock which has seen a phenomenal run up in anticipation of good numbers. The company's stock from March 31, 2016 to present day has moved up almost 14 per cent.
Force Motors operates its business under three verticals- Vehicle manufacturing, component manufacturing and tooling for other OEMs. Vehicle business alone contributes 70 per cent and rest both contribute 30 per cent. In vehicle business, its Tempo Traveller, an MUV has a significant share of 67 per cent in the market. In the last two years, company has doubled its production capacities from 700 units to 1,500 units per month due to growing demand.
"The company has a lot of potential to grow further. They are doing very well in the all there verticals- auto component, tooling and vehicles. They are supplying engines to world's biggest competitors in luxury car makers BMW and Mercedes Benz. That shows how reliable is the company. Plus, their Tempo Traveller is a market leader in the segment. As bus aggregator business is flourishing in India plus school bus, IT and BPO transport business will help them boost sales," said Daljeet Singh Kohli, head of research, India Nivesh.
One of the most important part of the company's vehicle business is supplying engines to luxury car manufacturers like BMW and Mercedes Benz. Though the company did not give the breakup in terms of revenue contribution it plans to ramp up its factories catering to engine supply to these luxury car makers.
"We are the only company in the world who is making engines for both of them. This is the first time when BMW has sourced engine manufacturing to other company. The luxury car segment in India is expected to grow further, hence it will help us to grow the business. We are now coming up with a brand new facility in Chakan which will manufacture engines for Mercedes Benz India," said Firodia.
Force Motors has been assembling Mercedes Benz engines and axles for all its C, E, S and M class cars and SUVs built in India at its Urse plant. Now, it is setting up another plant in Chakan for producing engines for Mercedes Benz with the investment of Rs 150 crore. The plant will be operational by end of June this year.
Force Motor's significant addition to the top line was achieved with the full operational engine factory at Chennai for supply to BMW India. This is besides the good growth in the engine and axles business with Mercedes Benz India. Force Motors has recently set up a new engine manufacturing facility near Chennai for BMW cars with the total investment of Rs 200 crore. It can produce upto 20,000 premium engines every year.
Despite being successful in all the three business verticals, Force Motors struggled to make its presence in the sports utility vehicle (SUV) market. It's first SUV Force one was launched in 2011 but failed to boost sales. It has managed to sell only 3,008 units in since the launch. Finally, this year in March, the company decided to quit the segment.
Firodia does not shy away from accepting the slow uptick for its SUVs. "This was our first attempt of manufacturing an SUV. Traditionally, we are a commercial vehicle company. We never operated in this segment and did not have the right understanding of this segment. Priorities for both car or SUV and a CV are totally different. Also, in the last ten years, Indian consumers' expectations have changed dramatically. DNA of our company was not really tuned to the personal cars. Plus, this is a very competitive market and even big players are struggling in this segment. I don't any regret what we have done. However, all of that helped us to move SUV technology to other products. Today, all of our Travellers are 100 per cent ABS compliant," he explains.
The company is also revamping its off road vehicle Gurkha with much improved features to boost sales. It was launched in 2014. It is now eyeing export markets for Gurkha. Its exports have grown 33 per cent last year in all products. It supplies the vehicles to markets like Ethiopia, Angola, Sri Lanka, Nepal entire UAE belt.
Force Motors in fast lane
* Rs 300 crore investment for expansion in FY17
* Setting up new plant for manufacturing engines for Mercedes Benz
* Recently set up plant for manufacturing engines near Chennai for BMW
* Market leader with 67 % share in MuV segment with its flagship product Traveller
* Eying tractor market of India in future