Summer Internship Project

“Alliances and Technology Transfer in the Auto Component

Industry”

Submitted in partial fulfillment of MBA-3C program2010-12

Submitted byName: Javed khan

Roll Number: A1808710031

Company Guide Faculty Mr.Mandar Virginkar Prof .Alka MauryaGeneral Manager (Corporate Strategy) Caparo India Ltd. Gurgaon

AIBS, AMITY UNIVERSITY

NOIDA

1

ACKNOWLEDGEMENT

I express my sincere gratitude to my industry guide Mr. Mandar Virginkar General Manager ( Corpor-

ate Strategy) Caparo Engineering India Pvt Ltd., for his able guidance, continuous support and coopera-

tion throughout my project, without which the present work would not have been possible.

My faculty guide Prof.Alka Maurya has been constantly guiding and supporting me by providing the

right direction, focus and understanding of the project and for continuosly encouraging me to take up

this topic.

Last but not least let me also thank the entire team of Caparo India Pvt Ltd., Mr. Rattan Yadav,

Mr.Rakesh Yadav and others in the allocation team for projects for providing me with this opportunity

to work on a project which is of paramount importance to the company.

Javed Khan

2

CERTIFICATE OF ORIGIN

This is to certify that Ms./Mr.___________________, a student of Post Graduate Degree in

_____________________, Amity International Business School, Noida has worked in the

____________________, under the able guidance and supervision of Mr./

Ms._________________________, designation______________,

Company___________________________.

The period for which he/ she was on training was for ______weeks, starting from ___________to

_____________. This Summer Internship report has the requisite standard for the partial fulfillment the

Post Graduate Degree in International Business. To the best of our knowledge no part of this report has

been reproduced from any other report and the contents are based on original research.

Prof. Alka Maurya Javed Khan

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INDEX

S.no.

1) Executive summary…………………………………………………………7

2) Company profile…………………………………………………...10

3) Introduction to project…………………………………………………….22

4) Case study…………………………………………………………..15

5) Research methodology…………………………………………………….23

6) Data analysis and findings………………………………………………...24

7) Bibliography…………………………………………………..48

8) Synopsis …………………………………………………………………...49

9) Conclusions……………………………………………………………………51

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CHAPTER-1

Executive Summary

5

Executive Summary

Caparo, founded in 1968 by Indian born British Industrialist, Lord Paul of Marylebone, is a fast growing UK based group with a 1billion Euro turnover. With business interests predominantly in the manufacture of steel, automotive and general engineering products, the group has a grown as a global entity. Caparo group is now a collection of over 40 companies operating from over 60 sites worldwide.

Caparo India, the Indian business arm of Caparo Group, began its operations in 1994, as a joint venture with India’s largest car manufacturer— Maruti Udyog. Today, through its two strategic business entities, Caparo Engineering India Pvt. Ltd. and Caparo Maruti Ltd, the group offers end-to-end solutions in designing, developing and manufacturing automotive sys-tems, assemblies, advanced composites, modules and components to Indian Automotive OEMs and Engineering Industry.

The Indian auto component industry had setup very large capacities to cater to the large growth in automotive volumes in 2007.However due to the global recession and the impend-ing consumption crunch of 2008 ,the largely invested capacities lay completely underutilised impacting both the company rating as well as cashflows with the bearing of the large fixed cost investment (assets) which could not be churned.Caparo is still facing the impact of these investments and has taken several measures and has come up with a strategy to maintain and strengthen its position in the global auto component market.

Caparo typically operates at the lowest end of the value chain in the automotive component industry and the main line of business is custom made products built to print. The manage-ment at Caparo has been bothered about the low gross margins of these virtually commodit-ised products which typically affect its cash to cash cycle and the working capital require-ments as well.

The company has the necessary strength to move to the value added segments typically pro-prietary products like chassis and suspension products which have a much higher gross mar-gin and very large market demand and a huge demand supply gap.

Caparo has come up with a multipronged strategy and one of the key levers is to enter the value added segment of chassis and suspension products which typically have gross margins in excess of 35% against gross margins of 10%-15% in general auto components with con-tinuous demand from the automotive industry.

The current market size for chassis and suspension capacity vehicles is 3500 crores.driven the automotive values this segment is likely to double to atleast INR 7000 Crores by the year 2014 driven by demand for the automotive industry.

If Caparo is targets a market share of close to about 30% of this market by leavraging its presence and current business relations with almost all automotive OEM’s to drive demand, it would have business volumes at about 2100 Crores which is likely to double their turnover.

Besides this Caparo has large unutilized landbanks in almost all automotive hubs viz. Chen-nai,Halol,Pune etc and necessary backward integration in terms of Stampings, Tubes, Fasteners, Aluminium die casting and the necessary infrastructures in some hubs and the

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building of the rest of the infrastructure would require very little investment. Calculated invest-ment are to the tune of 36 lakhs in Chennai without any working capital to 8 crores in Pune. The ROE for the Chennai hub exceeds 150% and Bawal and pune to the tune of 35%-36% which cross the required hurdles for automotive and manufacturing facilities. after expense calculations PBT level are the tune of 27% and above.The key competitors in the segment are Magna Cosma, JBM, SKH, Futawa, Eurozone, Magnetti Marelly etc.Caparo is seeking Joint Venture so as to build complete module which could act on plug and play in an automotive. Caparo is in discussion with Benteler and Magnetti Marelly and currently the discussions are under MOU stage.

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CHAPTER-2COMPANY PROFILE

8

THE CAPARO GROUP: COMPANY OVERVIEW

Caparo is a global company with local understanding, founded in1968 by Lord Paul of Marylebone which is managed and wholly owned by the Paul family. It is one of the largest 100% single family owned business in the UK.

Caparo is a private, diversified, UK based group, specialising principally in the manufac-ture and supply of steel, engineered and automotive products for industry although the group’s wider activities encompass materials testing services, hotels and private equity in-vestment. Caparo has its plants in following countries: - North America, UK, Poland, Mex-ico, Spain, India, China and Dubai

Group Turnover - € 1 billion

Net Assets – over € 180 million

Employees- 9,000

Number of sites worldwide-77

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CAPARO INDIA

Caparo India was first established in 1994 as a joint venture with Maruti Suzuki.At present; Caparo owns or has interests in 5 entities in India – Caparo Maruti, Caparo Engineering Private Ltd., Caparo India Private Ltd., Caparo Financial Solutions Ltd. and Caparo En-ergy. Many of the Caparo sites in India are a result of greenfield projects and contain state-of-the-art equipment. The businesses have extensive experience and a large cus-tomer portfolio in the automotive, construction, general engineering, aerospace, railways, oil and gas, financial, energy, and many other industries.

Caparo India currently employs 5000 direct and indirect employees across 25 world-class functional and upcoming facilities. Caparo India currently operates on 16 sites in India & is expected to complete construction of another 15 plants within next

two years.

CAPARO INDIA: COMPANY STRUCTURE

10

CAPARO INDIA OFFERINGS

11

Toolings

Steel forgings

AL die casting

Chassis members

Suspension & safety

Skin panels

Tubes & tubular products

Fasteners Under body parts

Modules

Tailerwelded blanks

CAPARO INDIA

Steel technologies

CHAPTER-3

INTRODUCTION

OBJECTIVE

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To prospect for joint venture partners for value added products (chassis & suspension) in the automotive space for passenger cars in order to in-crease Caparo’s contribution levels and margins

Build on Caparo’s brand equity through a tie-up with a global tier 1

Manage Caparo’s Key Accounts’ demand patterns for similar or value ad-ded products requiring a shared or similar setup.

Leverage Caparo’s Industrial Land Banks as equity in the venture

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CHAPTER 4 CASE STUDY

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THE AUTOMOTIVE INDUSTRY IN INDIA The Automotive industry in India is one of the largest in the world and one of the fastest grow-ing globally. India manufactures over 17.5 million vehicles (including 2 wheeled and 4 wheeled) and exports about 2.33 million every year. It is the world's second largest manufac-turer of motorcycles, with annual sales exceeding 8.5 million in 2009. India's passenger car and commercial vehicle manufacturing industry is the seventh largest in the world, with an an-nual production of more than 3.7 million units in 2010. According to recent reports, India is set to overtake Brazil to become the sixth largest passenger vehicle producer in the world, grow-ing 16-18 per cent to sell around three million units in the course of 2011-12. In 2009, India emerged as Asia's fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand.

As of 2010, India is home to 40 million passenger vehicles and more than 3.7 million automot-ive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second fastest growing automobile market in the world. According to the Society of Indian Automobile Manufacturers, annual car sales are projected to increase up to 5 million vehicles by 2015 and more than 9 million by 2020. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads.

VEHICLE PRODUCTION IN INDIA

Type of Vehicle 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Passenger vehicles 1,2 09,876 1,309,300 1,545,223 1,777,583 1,8 38,697

Commercial vehicles 353,703 391,083 519,982 549,006 417 ,126

Three wheelers 374,445 434,423 556,126 500,660 501,030

Two wheelers 6,529,829 7,608,697 8,466,666 8,026,681 8,418,626

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Total 8,467,853 9,743,503 11,087,997 10,853,930 11,175,479

Source :SIAM

MARKET SCENARIO

Passenger Vehicles SegmentThis segment is majorly constituted by two types of vehicles which are the cars and the SUV’s. Cars hold a major section with 78% of the market. SUV’s are counted under the premium vehicles in the industry, thus they hold a lower share in the market. The domestic PV market has grown by 15% over the last decade. The market leaders in this segment are Maruti Suzuki who has been in the same state since decades. Being one of the first entrants in the sector the company has enjoyed phases of monopolistic market in India. Al-though not much has changed in the market scenario, Maruti still holds the maximum share of 46% in the PV segment. They are followed by Tata motors at 15% share and Hyundai Motors at 14% share. Tata Motors has recently launched the new Rs 1 lakh car and has opened a new avenue in the market for the small cars manufacturing. Hyundai Motors India on the other

16

hand has established India as its manufacturing hub. Other share holders such as Toyota aim at capturing 10% of the market by the year 2010; Honda and Ford are the leading players in the Indian premium cars segment. Most of the leading manufacturers in the world have their presence in India as Joint ventures or subsidiaries. India is slowly emerging as a global hub for small car manufacturing industries. This is evident from the export statistics of the market. Hyundai Motors India are the leaders of the export market with 66% of the market share. Ma-jor section of the production of Hyundai Motors is exported to South America, Africa and Europe. The company uses India as a manufacturing and export hub of compact cars around the world. Maruti Suzuki follows Hyundai with 24% of market share. Major section of the ex-ports of Maruti goes to Latin America and the Middle East. 

SUPPLY CHAIN OF THE AUTOMOTIVE INDUSTRY IN INDIA

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VEHICLE PRODUCTION IN INDIA – SEGMENT WISE

MARKET SHARE

Fig.2 Source: ACMA

18

AUTO COMPONENT INDUSTRY: Turnover

Fig.3 Source: ACMA

19

AUTO COMPONENT INDUSTRY: PRODUCT RANGE

Fig.4 Source:ACMA

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VISION 2020: DOMESTIC AUTO COMPONENT

DEMAND

Fig.5 Source: ACMA

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FINDINGS AND ANALYSIS

1. The Automotive Industry is growing at a tremendous pace and volumes in passenger car vehicles are likely to double in the next 5 years. To complement this productivity and capacity addition as well as technology will play a major role in the productivity of the supply chain

2. The Chassis and Suspension Production in India is currently being driven via the assembly route which would not have a significant impact on production .In order to increase the rate of production and to meet the likely forecast of product constitution share of increasing from 10% to 13% modules will have to be introduced.

3. The automotive OEMs have already started suggesting this possibility and working with Tier1’s for this purpose.

4. From the graph (fig.1) we can see that the prodution of passenger cars is accelerating and growing at a rapid pace which is demand driven. 2,200 million in 2009 will be around 5100 million in 2015 and 87,00 million in 2020.

5.Also we can see that the volumes of passenger vehicles is virtually going to double as accord-ing to the forecast Ref Fig 1.from 2200 Thousand to 5100 thousand which is more than double the current production levels.

6. Most Passenger Car vehicles have been launching new platforms to spur this growth. In or-der to be able to produce as many cars ,there has to be constant support from the supply chain.

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METHODOLOGY

Initially,we did a SWOT analysis of Caparo ‘s businesses and also came to terms with their Strategic intent to enter the value added segment .The decision whether caparo should get into a particular product line (eg. chassis & suspension) is influenced by the demand from ori-ginal equipments manufacturers (OEMs) & we decided to estimate & understand market in-dicators by estimating demand in a few group of value added segments.

Products chosen were:

1. Chassis & Suspension Modules/Systems for Passenger Car Vehicles2. Exhaust Systems for Passenger Vehicles3. Axle Assembly for Heavy Commercial Vehicles

These Systems/Assemblies could be directly produced by technology acquisition as well as design in collaboration/Joint Venture with Global OEMs.

Chassis and Suspension Modules for Passenger Vehicles seemed to qualify as an immediate possibility due to demand from one of India’s largest passenger car vehicles.

This product line was studied initially by making estimates of various market indicators as out-lined below:

Initial Estimates were made grossly by speaking to a few industry contacts and later this was further refined in the following manner:

1. Market Size:Estimation of Demand from all OEMs (Passenger Car Vehicles)Estimation of Supply from various existing players

2. Current Demand-Supply Gap

3. Growth Rate of the segment based on growth rate of industry as well as demand drive for modules as enablers for increasing productivity

4. Future Demand Supply Gap based on the growth rate and existing and planned supply ca-pacities Year over Year for the next five years.

5. Market Trends influencing consumption

6. Actual Business Estimation & Confirmation by speaking to various OEMs and Players

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We studied the profile of some of the players in the segment. The largest player is JBM, which is primarily supplier to Maruti, Ford & likewise.JBM has manufacturing plants in Chennai, Pune, Gurgaon, Halol.They produce components like Axels (rear/front), trading arm. Torsion beam etc. By technological assistance through Futawa &Eurozone. Similarly suspension sys-tem are also supplied by SM rolling, Panse auto, SKH & likewise. All of these have either technological collaboration or use OEM produced design, but with the two fold growth of the automotive industry in the next 5 yrs, most automotive manufacturers have estimated that in order to meet this demand they would require modular systems & which would increase pro-ductivity both for OEMs segments as well the aftermarket where these modules could be used for plug-play basis without any external interaction.

The current market size of the automotive industry passenger cars production is growing at the fastest rate as shown in the graph.Suspension and chassis market today is about 2300 crore as estimated based on as the price of the entire system, & is likely to grow 7000 crores by 2015.The likely share of chassis and suspension production is going to increase because of usage of modules is going to increase from 13% to 16% by 2015.

By estimating the supply capacity and current suppliers of the major 4 players in the market of chassis and suspension for passenger car vehicles we found a gap close to 300 crore, this gap is likely to increase by almost 500%; 1500 crores. If moduler systems are not used, this will definitely hinder productivity.This gave us sound basis for evaluating opportunities & thereafter also based on market in-dicaters & trends and decisions with OEM we decided to approach market leaders in techno-logy like Benteler & Magneti Marelli. We also did some benchmarking based on research, capabilities and facilities of other suppliers like JBM and SKH who are currently supplying a major OEMs in this space in order to understand competitor setups etc

Source Association of Automotive Component ManufacturersSociety of Indian Automotive Manufacture

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CAPARO-SWOT ANALYSIS

STRENGTHS

1) Backward integration like tubes, fasteners, stampings & welding. 2) Current product portfolio contains chassis & suspension like trailing Arm, front cradle assembly,

rear torsion beam. 3) Large land banks around all their manufacturing plants at key Locations 4) Market share of over 15%-20% of all automotive components 5) Amongst the top 10 vendors of Maruti Suzuki India ltd, India’s largest passenger car manufacturer 6) They have a joint venture with Maruti Suzuki.

WEAKNESSES1) Lack of management control and partial degeneration2) Existence of chestered approach with dissimilar technology groupings.3) Lack of design & technological capabilities.4) Lack of process expertise.

OPPORTUNITIES

1) Large demand-supply gap in chassis and suspension system. 2) Market size: 7000 crores, 30% share market covers only 2100 crores. 3) Demand from global Original Equipment Manufacturers like ford etc in order to enhance production

THREATS

1) Many competitors are likely in the field2) Maruti has invited both Caparo and Skh and suggested joint venture partners3) Fast changing technology 4) Market demand may contract.

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Players in the Chassis and Suspension Market

Benteler Automotive

One of the largest industrial enterprises in Germany. Established in 1876 Type: Private family owned business Employees: 23150 Chairman: Mr.Hubertus Benteler Geographical presence:

o Locations: 150

o Countries: 38

Business Divisions Automotive

o Research & Development

o Chassis system

o Structures

o Engine & Exhaust system

o Mechanical Engineering

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Magneti Marelli Established:1910 Turover:Euro 4.5 billion Operating profit: euro 25 million Headquaters:Milan(Italy) CEO & MD:Mr.Euginio Razelli Geographical presence

Locations:114 Countries:18

Employees:32,000 Strategy: Focus on emerging markets in joint participation with established players.

Magneti Marelli is an international company committed to the design and production of high-tech systems and components for the automotive sector based in Italy(Milan)Headquartered in Corbetta (province of Milan), the company includes 77 manufacturing plants, 11 R&D centres and 26 application centers in Italy, France, Germany, Spain, Po-land, Czech Republic, Russia, Turkey, United States, Mexico, Brazil, Argentina, China, Malaysia, and South Africa.Magneti Marelli was founded in 1919 as a joint-venture between Fiat and Ercole Marelli, and was named as F.I.M.M. - Fabbrica Italiana Magneti Marelli; the first plant was estab-lished in Sesto San Giovanni near Milan, Italy. The company started as a magneto and electrical equipment manufacturer.

The business lines include automotive lighting systems, power train control systems, elec-tronic instrument clusters, telematics systems, and computers,suspension systems and components, exhaust systems, and motorsport, wherein Magneti Marelli develops specific electronic systems for Formula One,Motorcycle Grand Prix and the World Rally Champi-onship

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CAPARO-BENTELER SYNERGIES

28

Caparo SPV/JV

CHENNAI STAMPINGS CAPARO MARUTI CAPARO STAMPINGS-MARKAL CAPARO TUBES-DEWAS

BENTELER

CHASSIS HOT END SYSTEMS TUBES TUBULAR FABRICATION

FORD, SUZUKI, FIAT, GM

The synergies between Beneteler and Caparo’s Businesses make it a

viable case for exploration to begin with on the Chassis and Suspen-

sion Product Line for a joint eneterprise structure

BENTELER-PRODUCT LINES

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30

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ANALYSIS OF CHALLENGES

BENTELER LOOKING FOR MAJORITY IN JV -51%-75%(MAY POSSIBLY INVOLVE A LATER BUYOFF)

SPV/JV NEEDS 51% HOLDING BY CAPARO GROUP COMPANY IN CHENNAI/BAWAL

CHARGE CURRENTLY ON CHENNAI/BAWAL/PUNE AN ISSUE

PUNE-OWNED LAND-NO ISSUES ON STAKES IN SPV/JV

POSSIBLY A 50%-50% PARTNERSHIP MAY BE CONSTRUED UNLESS BENEFITS OTHERWISE FOR STAMPINGS

CAPARO -LAND BANKS AS EQUITY-PRICE NEEDS TO BE DISCUSSED FOR INI-TIAL NEGOTIATIONS

FORD AND SUZUKI TIGHT PRICING ISSUE NEEDS TO BE DISCUSSED

POSSIBLE STAKE MAY BE OFFERED IN STEEL TUBES PLANT

TUBULAR FABRICATIONS –NEW PROJECT IN CHENNAI MAY BE SUPPORTED-HIGHER PBT LEVELS ON WELDING TUBES/GOOD MARKET IN THE SOUTH

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CAPARO – VALUE PROPOSITION

Entry in value added business / technology drive/ Proprietary products- HORIZONTAL SPREAD- MARGIN- RISK MITIGATION

Brand equity Asset liquidation/ leverage Possible exit/reduction in equity exposure in specific caparo business –tubes Possible support for new projects fabrications.

BENTELER –VALUE PROPOSITION

Successful Tie up and entry into a broad range of synergistic business areas/products

- Tie up with SKH unsuccessful- Currently producing chassis in Pune

Entry into tubular and distribution business in a big way in India(including a base for

seamless tubes) including the trade route

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Location Analysis

Locations chosen Chennai, Pune, Delhi NCR, Halol these are the top 5 automotive hubs in India.Ford Nissan - ChennaiMaruti- BawalMahindra and General Motors-Pune

ChennaiCurrent products:Stamping, rear torsion beam, forging,Al Die casting and tool roomCurrent landed area 119 acresCurrent covered area 8 acresEstimated Cost of Land: Rs 2 Crores /AcreRemaining area available for construction is at 50% FAR= 59 acres

Current available product to cater chassis and suspension component and assemblies:1. Current portfolio at stamping including Rear Torsion Beam2. Available infrastructure includes Test Rig for the Rear Torsion Beam. Installed at the

tool room, Presses from 50 to 1000 Tonnes, Tube bending, MIG welding etc.3. Other available infrastructure includes Aluminium die casting for small components

used in suspension systems, paint shop with ED coating facility etc.4. Required Investment by Caparo at Chennai:32 Lacs(without taking :and into Account)5. Equity by partner would be to the extent of 51% of the total facility usage in the ven-

ture which would include Land, Building etc6. Additional Equity in the venture is assumed to result in Cash out situation for Caparo

India enhancing the cashflow of the group by utilising the leasehold land banks which have allowable joint ventures on them.

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35

CAPARO CHENNAI HUB

12870 Sq m

2600 Sq m

1400 Sq m

CAPARO STAMPINGS

64

6400 Sq m

1200 Sq m

5125 Sq m

8075 Sq m

600 Sq m

CAPAROFORGE SHOP CAPAROFORGE MACHINE SHOP

BUILT UP SPACE

FREE SPACE

PARTIALLY FREE SPACE

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CAPARO TOOLROOM VMC/HMC-OKUMA/HARTFORD-7 NOS

DIE DESIGN-MANUFACTURING-FIXTURING-TESTING

12 M LONG MEMBER DIE FOR VE COMMERCIAL VEHICLES

340 BIW TOOLS FOR NISSAN MICRA

3D CMM-BROWNE & SHARP

WORLD CLASS TOOLROOM IN INDIA

CHENNAI

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CAPARO STAMPINGS

1000 600 400 400

800 800 800 500

HPS & LPS PRESS LINE TONNAGES

250 200 160 110

CNC TUBE BENDERS(6-AXES & 4-AXES)

RESISTANCE/SPOT/SEAM WELDING

PAINT SHOP-

CED-750,000 Sq m/ANNUM

PE -400,000 Nos /ANNUM

INHOUSE TEST RIG DESIGN-MANUFACTURING FOR RTB,3D CMM-BROWNE & SHARP

Current Utilisation:50%

CHENNAI

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CAPARO ALUMINIUM FOUNDRY

1600 1400 1250 840

630 500

HIGH PRESSURE DIE CASTING LOCKING FORCE

HPDC & GDC CASTINGS

GDC CASTINGS UPTO 80 KGS-INHOUSE SAND CORE MAKING

FULLY MACHINED SOLUTIONS

DEDICATED LINES

VOLVO-FRANCE

GM HOLDEN-AUSTRALIA

HPDC

GDC

Bawal HubCurrent products:Stamping, rear torsion beam, forging, Al Die casting and tool roomCurrent landed area 100 acresCurrent covered area 50 acresAvailable for fresh Construction: 32.25 AcresEstimated Cost of Land: Rs 1.4 Crores /Acre

Current available product to cater chassis and suspension component and assemblies:

1) Pressing Setup from 50Tonnes to 1000 Tonnes

2) Available infrastructure includes a newly constructed paint shop at Bawal

3) Required Investment by Caparo at Bawal:2 Crores 45 Lacs(without taking and into Ac-count)

4) Equity by partner would be to the extent of 51% of the total facility usage in the venture which would include Land, Building etc

5) Additional Equity in the venture is assumed to result in Cash out situation for Caparo In-dia enhancing the cash flow of the group by utilising the leasehold land banks which have allowable joint ventures on them.

39

40

CAPARO BAWAL HUB

239 62

203

240 226

300 198

80 80 175 163

63

104

102

PLOT NO. 315-318

PLOT NO 313-314

GROUP CAPTIVE POWER PLANTS

PLOT NO. 309

CHASSIS SYSTEM a(CVPIPL)

PHASE 1

5 ACRES

PLOT NO. 307 PLOT NO. 308

PHASE 2

5 ACRES

8 ACRES

INTERNAL ROAD 15 MTR WIDE

TW SHEET/GROUP CAPTIVE STORAGE

11 ACRES

18 ACRES

Coil blankingCOMPOSITE MFG. UNIT

CVPIPL

BAWAL POWER (P) LTD. R

OA

D 6

0 M

TR

WID

EROAD 30 MTR WIDE

ROAD 30 MTR WIDE

paint shop

59 Acres Land Bank at Bawal-40 kms from IMT MANESAR(PLANNED EXPANSION)

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CAPARO MARUTI STAMPINGS

800 400 400

500 315 315 315

HPS & LPS PRESS LINE TONNAGES

400 400 400

HIGHEST SHARE OF BUSINESS FROM MARUTI IN BIW AMOGST ALL JV VENDORS

RESISTANCE/SPOT/SEAM WELDING

UPCOMING PAINT SHOP

SEVERAL SUPPLIER AWARDS

3D CMM-BROWNE & SHARP

400 400

200 160 100 80 25

Halol HubCurrent landed area 100 acresCurrent covered area 75 acresAvailable for fresh Construction: 10 AcresEstimated Cost of Land: Rs 50 Lacs /Acre

Current available product to cater chassis and suspension component and assemblies:

1. Pressing Setup from 50Tonnes to 1000 Tonnes

2. Current Portfolio of products include supplies to General Motors (Rear Torsion Beam, Front Cradle etc)

3. Available infrastructure includes a newly constructed paint shop at Bawal/Steel Service centre at Halol

4. Required Investment by Caparo at Halol: Nil

5. Equity by partner would be to the extent of 51% of the total facility usage in the venture which would include Land, Building etc

6. Additional Equity in the venture is assumed to result in Cash out situation for Caparo India en-hancing the cashflow of the group by utilising the leasehold land banks which have allowable joint ventures on them.

42

Pune AreaCurrent landed area 120 AcresCurrent covered area 90 acresAvailable for fresh Construction: 30 AcresEstimated Cost of Land: Rs 2.5 Crores /AcreRequired Investment in Pune: 7.5 Crores for a fresh setup

Current available product to cater chassis and suspension component and assemblies:

1. Pressing Setup from 50Tonnes to 1400 Tonnes-Hydraulic Presses

2. Current Portfolio of products include al suspension child parts to Fiat India

3. Available infrastructure includes welding, bending setup

4. Equity by partner would be to the extent of 51% of the total facility usage in the venture which would include Land, Building etc.

5. Additional Equity in the venture is assumed to result in Cash out situation for Caparo In-dia enhancing the cash flow of the group by utilising the leasehold land banks which have allowable joint ventures on them.

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44

CAPARO PUNE HUB

30 ACRES OPEN AREA

FOR EXPANSION

PLANT AREA

45

CAPARO STAMPINGS

1400 D/A 600 600

500 315 315 315

HPS & LPS PRESS LINE TONNAGES

400 400 400 400

COMPLETE SET OF SUSPENSION CHILD PARTS FOR FIAT PALIO & LINEA-(100% SHARE)

COMPLETE SIDE WALL ASSEMBLY FOR TATA WINGER

RESISTANCE/SPOT/SEAM WELDING

3D CMM-BROWNE & SHARP

400

200 160 100 80 25

600

SCHULLERHYDRAULIC

LINE

600

BIBLIOGRAPHY

1) SOCIETY OF INDIAN AUTOMATIVE MANUFACTURER.

2) AUTOMATIVE COMPONENTS MANUFACTURERS ASSOCIATION.

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SYNOPSIS

Caparo is a multinational automotive company with a broad product line.Caparo India, the Indian business arm of Caparo group, began its operations in 1994,as a joint venture with India’s largest car manufacturer-Maruti udyog.Caparo India leverages its exhaustive cap-abilities in metal stamping ,fastening, Tubing Forging and Aluminium foundry business. The company has necessary strength to move to the value added segments typically pro-prietary products like chassis and suspension, Braking etc. Which have a much higher gross margin and very large market demand and demand supply gap.

Caparo has come up with a multipronged strategy and one of the key levers is to enter the value added segment of chassis and suspension products which typically have gross mar-gins in excess of 35% with continuous demand from the automotive industry.

They have shortlisted the Chassis and Suspension Product lien to enter into based on capabilities and facilities as well as demand from major automotive OEMs like Maruti and Ford.

They Studied key players who could be looked at for a joint enterprise structure and have shortlisted Benteler Automotive based on industry information of their strategic intent as well as a study of Caparo’s current facilities and requirements for such a joint venture in key hubs of Bawal,Chennai and Pune as well as Halol which are the largest automotive hubs in the country.

Based on demand from OEMs to increase throughput in order to cater to vast consumer markets ,Caparo has been encouraged to enter into such arrangements. Assessment of the financial impact as well as asset banks required to start up such a venture would provide caparo with dual benefits of utilising existing land banks as well as entering into a specialised proprietary products segment affecting there gross margins,cashflow,working capital cycle as well as brand equity in a positive way.

The Significant demand supply gap and the existence of very few players in the country with capabilities to cater to the world class technology and design specifications and de-manding volume would act as drivers to fuel the growth of such a venture.

The return on Equity ij sokme of the Hubs exceeds 100% due to prior rxisting faicilties as well as required skilled manpower for the purpose.Caparo also wishes to cater to the global volumes of Benteler through their existing stamping and aluminium die casting fa-cilties.

Market Share wise Caparo aims to tap a 30% market share within 2 years and a gross block of 500 Crores out of the 2100 crore demand supply gap(based on projections)

These will be at gross margins of 40% and final PAT levels of around 25% which is one of the highest standards in the automotive industry. This would encourage Caparo, Benteler has also have certain benefits as it is expanding it is exploring new market in India

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This venture if successful then it will double the benefits of the caparo in the next few years as well as the profitability will be double in the next 5 years and similar benefits would be for Benteler which would be able to entrench the Indian Market for the first time in 10 years since they have set up their facilities in India.

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CONCLUSION

The automotive industry has faced major trend changes in the concentration of the mar-ket. It has shifted from a domestic market to a monopolistic to a global market to a per-fectly competitive market scenario. All these changes were accompanied by growth and development of the industry and overall economy as well. India has finally emerged as a world class entity in the global market for automobiles and has made its presence felt by the other nations. The future of Indian Auto Industry is bright as more and more compan-ies are getting attracted towards the Indian Market and are setting up their manufacturing units in India.

After investigating market indicators, the current company position,capabilities,facilities and objectives and strategic intend as well as its asset holding and synergies with Bentel-er.it is concluded that there is a viable business case for further prospecting with Benteler automotive and other OEMs and would result in three prong benefits including

1) Impact on turnover2) Utilization of current asset holdings and facilities and3) Increase brand equity for Caparo.

This case has been approved by the management and further exploration regardingThe business model is currently been pursued.

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