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Interview

with Shishir Joshipura, Managing Director, SKF India

29.08.2011 / Energyboardroom

Could you start by assessing the Indian business environment and SKF’s capacity to grow within it?

India is going through very interesting and challenging times. The Growth in Economy will drive demand for Technology driven offerings.

The working environment is very demanding from a human resources perspective. The rapid growth will increase the demand for qualified resources, thus inviting an increased focus on retention of talent. Innovation, energy efficiency and reliability of operations while managing costs in an ever improving way are some of the challenges all industries are faced with.

SKF has an important role to play within the Indian O&G sector. SKF provides a cutting edge benefit to the industry by leveraging the knowledge accumulated globally over a period of time, across our core technology platforms. I do feel that the Indian industry is moving towards a more productive working environment through adoption of higher technology.

India is in a phase where demand is growing ahead of supply. This creates a positive pressure on existing players to create more capacities.

Also, over the last few years, the government has understood that the country cannot grow if only a small part of the population grows in economic terms. Government’s initiative on driving inclusive growth, this ensures that people from lower strata of economic order are able to rise above subsistence income and join mainstream consumers, creating a demand for new set of goods and services.

When publishing the company’s financial results, you stated that India’s economy is facing some near-term challenges even if the longer term outlook remains encouraging. What have been the challenges that SKF has specifically faced in India these past months?

The first challenge is represented by the fact that, as a result of stubbornly high inflation, the Central Bank has been forced to raise the interest rates eleven times. At some point, this will affect the demand.

The second most important challenge for us is to ensure that we are able to attract and retain talent. It is very critical because in a fast growth economy everyone wants to start fast, which intensifies war for talent.

The third dimension – it is not necessarily near term – concerns the large number of reforms needed in India, especially on the labour side of the law, as well as in terms of land acquisition for new projects. Some states, like Gujarat and Tamilnadu, have shown a way on how things can be done differently. These states have attracted different levels of investment, and now the whole country is slowly moving towards that.

Out of the group’s total sales, 50% comes from the auto industry and the rest from other industries including steel, cement, power, wind, textiles, O&G, defence, capital goods, construction equipments etc. How important has O&G been for India recently and for SKF?

O&G is a very important sector for SKF, given the fact that country has decided to set up meaningful capacities on the refining side. By allowing the private sector to invest, India has seen the creation of the largest green field refinery in the world. The public sector refineries have also started modernisation in a big way. Everyone is now focused on higher levels of safety, productivity, and efficiency in the operations.

Companies like SKF who can bring products and services to improve any of these dimensions in operations have an important role to play in the development of this sector.

What makes SKF a unique and necessary partner for the O&G industry when it comes to increasing production and cutting energy consumption?

SKF is known as a bearings company, but it is in fact much more than that. There are other platforms of our technology which remain relatively unnoticed and actually play a significant role in our ability to transform ourselves from a component supplier to a solutions provider. SKF offers solutions that go beyond the bearing, involving sealing solutions, lubrication systems, mechatronics and a whole range of services to improve reliability and productivity.

In any plant, usually, there is some form of rotational motion taking place, which implies that there is a bearing out there somewhere, and it is possible to monitor the health of equipment by monitoring the bearing. Our solutions provide indications about what is happening upstream of the bearing, considering the bearing is almost always the last part to fail in a rotating system. We are able to tell clients what is the state of health of their plant by deploying state of the art technology- Vibration analysis, condition monitoring and thermography amongst others – we can predict breakdowns before they occur thus, significantly reducing the cost of managing such instances , given that the customers don’t have to manage something that has already broken down!–

Integrating across the platforms SKF makes it possible for customer to have an optimised system instead of managing products from miscellaneous suppliers having to integrate them all – not necessarily in an optimal way. The integrated systems from SKF helps customer optimize capex, reduce the life cycle costs, the cost of transaction and with improved reliability!

Within the O&G market, would you say that SKF is perceived as a solution provider to the extent that you wish? How challenging is it to brand yourself in a market dominated by a few key state owned companies?

The lure to be branded as a component supplier is very easy: there is a tender, a requirement, you bid for it and go forward with it.

That is not the path we have chosen: we go to the industry and understand what they need and then propose an optimised solution. In an ever competitive world customers are increasingly open to this idea. Problems have always been there, and performance pressures have pushed customers and suppliers to find alternative solutions. SKF makes available its global experience and expertise across the technology areas to help customers improve their own operations.

During CY’2010, the company started its Haridwar operations, with capex of around Rs. 150 crores and currently its utilization capacity stands around 55%. How does the order book look like today and how confident are you to use more of its capacity?

In fact, we are operating at full possible production level today. The published figures of 55% result from the fact that the cycle of product approval is such that we have to go through a lengthy homologation process prior to commencing commercial production. Every month we produce more than the previous month.

SKF has already invested 3000 MINR in Ahmedabad to make industrial bearings required by various sectors such as Wind power, off road vehicles, Railways, Oil and Gas amongst others. These are two green field projects where we have already commenced production. In addition to these two investments, SKF is investing another 1500 MINR for the upgrading facilities in existing locations, for modernisation and de-bottlenecking. SKF is also setting up a state of the art seals manufacturing facility in Mysore at an investment of 750 MINR.

These investments show the level of commitment that SKF has to India.

Having existing local facilities reduces the dependence on imports and therefore on depreciation of the rupee and complications resulted from logistic operations. How much of an advantage is this vs. competition?

The most relevant dimension is the fact that we are able to develop and deliver a product that is closer to the customer. It allows us to interact much more closely with them, to have a deeper appreciation of their need and business environment.

In terms of managing logistics, we have the necessary facilities on ground here; it makes our position much stronger in the market place. There is nothing more valuable than time in business.

Similarly, to what extent can the manufacturing facilities serve as a base for international operations?

The Ahmedabad facilities have in fact been set up with this particular focus. It is only the fourth such facility in the world for the group, and it is going to feed the global market, as well as the Indian market.

The bearings we make in the Pune factory are exported to Europe and Latin America. As our customers strengthen their operations in India we will have a larger role to play, considering we work with them on a global level.

This is our 50th year in India as a manufacturing company, and we are very proud of the fact that we have played an important role in India’s Industrial journey.

What are your personal ambitions to grow SKF India within the Indian market?

The first and foremost is that we are already a market leader and we want to remain that way. We believe that we can leverage power of knowledge engineering to help the country grow in a technologically advanced way. Thus participating in India’s success story.

We want to bring our global experience to our customers and are very bullish about SKF’s growth in India.

What is your final message to the readers of OGFJ?

As India’s economy develops companies like SKF will have a significant role to play in helping the customers achieve their growth through higher productivity and efficiency in their operations.

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