with Rabindranath Burman, Director & Country Head, ITT Corporation India Pvt Ltd
The group announced this year a restructuring of the company with the spin off of the defense and water related operations, while ITT Corporation will continue as a standalone, highly engineered industrial company. What will be the implications of these changes for the Indian operations?
This is what we say as ONE HISTORY with three dynamic futures. ITT will capitalize on a unique opportunity to reshape its diverse portfolio of business. Each will be more focused and have greater value generating potential. The groups will be called ITT Exelis (Defence), ITT (Industrial group) & Xylem (Water Group).
The Xylem group caters to the Vital Water market, implementing transport, complete recycling, Biological treatment along with preservation of water. We have been volunteering in groups and we have been setting up reverse osmosis processes. We also understand our responsibility towards the society and have been contributing in a way we promote this concept of helping out the deprived segment of society globally.
The ITT vertical is the group that I belong to, has retained its heritage name of ITT with nearly a century of value creation and completely focused on Industrial Technology Serving customers in Energy, Infrastructure, Electronics, Aerospace, and Transportation .
The IP (Industrial Process) division primarily deals with Oil and Gas (O&G), Power, Mining, Paper and stock, Chemical and petro-chemical markets.
Under ITT’s umbrella, we have a heritage brand called Goulds Pumps. It is a hundred plus year-old Company and a globally renowned brand that develops systems and modules that provide customers high- end, energy efficient solution.
Indeed, customers have started to realize that the capital expenditure accounts for only about 12- 20% of the entire life cycle costs. What the actual life cycle comprises is the energy, the downtime and the maintenance costs.
Customers are indeed concerned about how much power they are saving. Thus, it is not only the capital expenditures (CAPEX) that customers are worried about today, but it is the total life cycle cost. In India, we have started to pick up on the concepts of carbon credits and emissions, and therefore every kilowatt saved is money earned. Hence industry is entering a phase where the decision makers are mapping all their utilities and operational costs on a much wider horizon than on CAPEX only.
In my opinion, this is a turning point in India as it allowed the market to move from being only price sensitive to becoming more technologically oriented. This has helped companies grow to higher level of operation excellence that are in the premium segment.
The other two important factors that we are promoting are our units Pump-Smart® and Pro-Smart®. These units reduce energy use by providing customers with variable speed. Evaluating plant loads at different times of the day, one finds a lot of energy is wasted when equipment is running at 100% of its load, but not all of it is being utilized. What ITT offers is to study the plant, and then optimize it, based on the plant load. The PLF (Plant Load Factor) is what we target.
The pressure is also on CAPEX due to capital constraints. Let us take a customer that has had a turbine or a pump offshore or onshore for about 20 years. The customer does not need to throw away that piece of equipment, because we are able pick it up, perform reverse engineering and put it back. This initiative positions us as a solution provider rather than as equipment supplier. We are able to study the requirements and the equipment and provide customers a total basket solution.
We also have a valves division, with set ups in the US, the UK and India, which offers a wide range of both engineered and Bio Pharma Valves. We produce hygienic valves, complementing the pumps offering.
Overall, we offer to the Indian market Pump-Smart®, Pro-Smart®, valves and remote controlling. The remote monitoring system provides the capability of monitoring a unit remotely from anywhere in the world.
In India this concept is maturing and taking shape from a stand point of remote to Physical presence.
Under ITT Corporation we also have sub groups in Controlled Technology / Motion Control and Interconnect Solution that provide all types of high end connectors, shock absorbers and related utilities for their market segments.
How is the management structure going to be re-defined in India after the split?
We will have two Leaders in India for post ITT spin vertical units
I will be looking after the four value centers in the industrial segment: IP (industrial process), with its heritage brand Goulds Pumps headquartered in Seneca Falls in New York; CT (Control Technologies), including brands like Burny, Enidine, Kaliburn, for plasma cutting machines; ICS (Inter Connect Solutions), which encompasses brands like Veam / Cannon that promote the connector business; and Motion Technologies where we are pioneers in providing shock absorbers through brands such as Koni & Jarret. Market segments from aerospace to railways to F1 Ferrari apply our kinds of shock absorbers.
The other vertical, which I referred to as the Xylem group, will be comprised of two divisions: RCW (Residential & Commercial Water, and WWW (Water & Waste Water Management), will be headed by Mr Sam Yamdagni
Do you see any loss of synergies in this transformation plan including less control over the cash flows for instance, or only benefits?
I see more benefits. If weighed, there is more focus at the respective group. Thanks to this new structure, we are able to deliver more. We will be more focused, leading to more accountability and more responsibility which only adds to more value & contributes to the overall output of the entire group.
The ITT group has been in India since 2007. Why such a late entry in the Indian market?
We were in China for about 14 years and we started realizing India’s equal importance as an emerging market. We realized the kind of impact India could have on a global level. The plant that we have built up in India is a WORLD CLASS facility which has not only won Internal awards but acclaimed by various customers visiting us both from the domestic and the international segment.
Looking at the total revenue plan on a financial scale, 40% comes from exports. This means India is not only a low cost country (LCC), it is a LCC with an added advantage of quality and communication. The Indian manpower is constituted by a young pool of engineers with high communication skills.
At the macro level, we have just been corrected to 7.6% Gross Domestic Product (GDP) growth by the Centre for Monitoring Indian Economy (CMIE). I do not feel it is going to drop, considering the strong government commitment.
The government has realized over the past five years that they needed to deal with concepts like single windows and quick clearances, which were at a bottleneck before. Foreign Direct Investment (FDI) is welcome now and even if there are sectors like defence where restrictions still apply, overall it became much easier to do business in India.
In India, multinationals have developed manufacturing centers as well as engineering centers. What do you feel is a greater power from India, its engineering strengths or manufacturing processes?
We have what is called an India Tech Centre that employs roughly 60 engineers working out of India. Their job is to support global projects at a scale of R&D and at a scale of new developments while also synergizing product to be aligned to new strategies.
India is not only a manufacturing hub but also a talent pool specifically from the engineering side. ITT India has won awards globally for the past two years for its level of innovation.
We have extensive training programs, a strong team of people, migrating from one part of the world to another, and we have the best of both worlds.
What is the break-up of revenue between export operations and the domestic market?
It is 80% domestic and 20% exports. We are aggressively pursuing the export initiatives with large overseas customers visiting our India plant. They have expressed their faith by sourcing pumps out of our facility, which is growing fast and we envisage it becoming a hub supporting Global projects.
We established the factory in August 2008, and started the first product line in December. Over about 3 years now we have implemented various processes.
The technologies in ITT are centralized along with strong quality systems. ITT, in India and abroad, values its ethics and compliances very highly and we work along various gates of certifications.
The idea is to maintain a high level of products irrespective of which part of the world where they are manufactured. The processes are stringent and we have started exporting from here.
Before 2007, we had a group called GSS (global sourcing and supply) which had been operating in India over the past years. Through them, we developed many relationships with vendors who are still our partners for components from India to facilities in across the globe.
Since a number of components were getting sourced out of India, it made sense to set up a base in India as well.
You are in charge of profit and losses (P&L) now. What would you say are the most important growth drivers of the company, and how important has the O&G sector been in this growth?
O&G is primarily responsible for the growth right from the downstream to the upstream and it will be the prime focus for the next three years as well. O&G and Power are driven by strong commitment from government revenue so it will be the segment with growth.
We will complement this segment with our heritage brand “Goulds Pumps“ which is a globally acclaimed base serving the O&G, Chemical, Mining, Paper & the Power segments.
There are a lot of refineries in India, continuously adding new capacity, with BPCL, HPCL, HMEL, and Reliance setting up a petrochemical plant as well. It will definitely be a driving force in both the top and the bottom line of the P&L.
Large companies like Shell have also been taking equipment out of India which has resulted in India being strategically very important in serving the local market as well the global market. That is the synergy we work with: serving our global unit while pushing through our local demand.
Do you see any challenges working with the PSUs?
This is a sector that has graduated from a price sensitive segment to a service oriented segment The after sales service that you provide is what has become the recognition point of association.
There has been a shift from a PSU dominated market to a number of private partnerships. For instance, the biggest refineries in India are not PSUs but Reliance and HMEL, which is a partnership with the Mittal Group.
O&G would potentially see three major challenges.
First, considering that the country has excess refining capacity, potential investments in the future would be in the lines of distribution.
Second, access to crude oil is a bottleneck – the input is crucial and the real challenge lies there. Although explorations are constant via Essar or Reliance, imports are still crucial.
The growth will be mostly in the petrochemicals, since refining is in excess. The petrochemical market is also graduating to a very commercially viable point.
Third, with respect to gas, the fertilizers which were urea-based are moving to be gas-based or liquefied natural gas (LNG) feed. This would also be an interesting growth sector.
ITT has the ambition of being in the top five in the local FTT market by 2012. Are you currently in line with this objective?
These objectives are segment specific. Fortunately in India, unlike in China, the Qualification criterion is stringent to even be able to participate in a requirement. We have what we refer to as a PTR (Proven Track Record) which only opens doors to established players and keeping out the weeds .
In that context we have our own shares and I would see ourselves as one of the major top players in all industrial pump sectors in India.
The customs’ tariff is very high in India, which affects us particularly. We are thus moving strategically to a localization programme from an import base to offset this like all other major players. Furthermore, working with the PSUs relies on a tender-based system, where you have to move through both technical and price requirements. There is a two tier type of bid where you are screened separately A) on your technical capabilities which if you qualify you move to the second tier B which is price Bid .
However, efficiencies of the equipments are taken into account, and that is an offset to the price of the product as well. Thus, nowadays not only the organic price of a component is being evaluated but also the total cost of ownership.
Moreover, the aftermarket and the service sector are becoming really important to our customer today. It is all about customer service and what we say as Customer delight: the person who deals with you during a crisis will have a more effective relationship with you as opposed to the person who is not around when you need help. This is turning into a very predominant trend in the market at the moment.
Operational excellence and Customer delight are our Goals to result in what we say “ Ease of doing business ”