The strategic ingredients going into our globalisation endeavour are likely to ensure
that we emerge more sustainable, enhancing value, recall and respect.
Sunil Chordia, Chairman
Overview
The story of the evolution of a company must be examined across the different phases of
its existence, influenced by market realities, competitive strengths and proactive
investments.
When we went into business more than two-and-a-half decades ago, there was a focus on
addressing companies closest to our presence. We brought to this engagement a culture of
operational austerity, commitment to serve and the ability to reimagine the operating
dynamics.
We did well in this regard; the Company grew from a consolidated bead wire
manufacturing capacity of 20,000 TPA around 20 years ago to 54,000 TPA by 2014 and
1,20,000 TPA by 2024. During this period, we widened our national manufacturing footprint
from one to two, our manufacturing locations from one to three and our marketing presence
from one country to 11.
This growth – in presence, trajectory and speed – transpired due to the
Company's capacity to extend beyond the realities of the day and address the needs of
tomorrow. More specifically, the growth transpired out of a need to rethink the Company's
presence from the local to the regional to the national to the international to the
trans-continental.
The globalisation factor
At Rajratan, we are now at that point in our existence when holistic sustainability can
be deepened through the progressive globalisation of our operations: to manufacture where
the costs are broadly the lowest, deliver to markets where the overall price-value
proposition continues to be among the highest and provide customers with a portfolio of
bead wire products where quality is excellent. In the past our focus ensured that we
extended our presence from manufacturing in India to Thailand and thereafter from a
landlocked facility to a port-based location.
I am pleased to report that our globalisation commitment now appears to be coming to a
head following the commissioning of our Chennai plant. The patient strategic broadbasing
of our manufacturing facilities must not be seen only as a sequence of incremental
capacity expansion; it must be seen as a decisive initiative in our commitment to
progressively globalise our portfolio, presence and operations.
These are some of my reasons why the directional movement was warranted.
One, following an increase in realisations in the last few years, there was an
increased capacity within our sector. This increased competitive pressure moderated
realisations during the last financial year. At Rajratan, we believe that with the sector
graduating from value-driven to volume-driven, there will be a bigger premium on the
ability to bring a larger manufacturing capacity into play. This larger capacity will make
it possible for a company like ours to stay consistently in the market, service the
complete requirements of our customers and amortise more effectively our fixed costs
across a larger output. The projected outcome of this strategy is likely to increase
offtake on the one hand and generate a lower break-even point on the other. This interplay
is expected to enhance our competitiveness across market cycles. One of the first
manifestations of this increased viability will be a smoothening of our profit or margin
curves. During the most challenging market phases, we expect to remain largely liquid with
a slight reduction in our margins or profits; during periods of buoyant demand, we expect
to maximise output and report the smartest rebound in overall profitability.
Two, the increased capacity is expected to translate into stronger customer
relationships. Most global tyre manufacturing customers seek the sustainability of their
operations. Among the principal drivers of this sustainability are sustained investments
made in the manufacturing capacities by their vendors (or companies like ours). While this
expanded manufacturing capacity may be fully utilised only a few years down the road, what
it does in the immediate scenario is to send out a message that our company is proactively
prepared. This indicates that should the markets turn unexpectedly buoyant we will not
encounter any challenge in addressing the increased needs of our customers. This does not
just put companies like ours at ease; it provides a number of our customers with the
trigger to enhance the proportion of sales being made from us and empowers them to widen
their orders from us to service their various global manufacturing facilities. Three, we
believe that our globalised mindset represents an effective risk hedge. A large capacity
makes it possible to strengthen our service and provide bead wire within a considerably
shorter turnaround time when compared with imports. Besides, this service makes it
possible for our tyre manufacturing customers to nurse a lower inventory of bead wire,
moderating their working capital outlay and strengthening cash flows that can then be
utilised to strengthen other areas of their business. Four, the globalisation of our
corporation entails a capacity to be approvals-ready and certifications-prepared. In a
world where quality standards are rising and transforming, the only insurance is derived
from the capacity to commit to quality compliances and process standardisation. This
assures that if the means are consistent, then the outcomes will be predictable. At our
company, we see this capability as a competitive advantage: in a world where approvals by
marquee global companies take years, our ability to possess relevant customer approvals of
our plant, process and product makes it possible to provide bead wire on demand – not
just to one plant of a customer in one country but multiple plants of the same customer
across geographies.
Five, we believe that the globalisation of our corporation represents a gateway to
sustainability and stakeholder value-creation. This is not to be considered as a cost of
staying in business; it is not a compulsion; it represents an opportunity. We believe that
the more effectively we globalise our corporation, the more broadbased our risks and the
wider our opportunity canvas in servicing more customers. By being able to enhance offtake
at stable margins and steady realisations, we would then be able to enhance revenue-driven
organisational value. This implies that our growth will be driven not by a short-term
arbitrage of realisations but by a medium-term expansion of our sales volumes, market
share growth and repeat revenues from existing customers. We believe this approach to be
more sustainable, enhancing the confidence of all our stakeholders. Six, the senior
marketing team at Rajratan is evolving from a completely Indian profile to a global
personality. The Company made select recruitments of senior marketing professionals to
represent the Company's interests in Asia, Europe and the America. These individuals were
recruited from the terrains of their presence, enhancing a cultural familiarity with
prospective local customers. We believe that a sustained presence in an international
geography will inspire customer confidence, translating into an increased customer
procurement share on the one hand and effective referrals on the other.
Seven, the globalisation of our corporation is expected to benefit us just where it
matters – our brand. In a competitive global environment, an increasing number of
customers seek to work with vendors that are progressive and transforming. In this
context, our endeavour to globalise will prove brand-enhancing, strengthening the
confidence of our customers to engage with us or enhance the proportion of their
procurement from us.
In view of this, the strategic ingredients going into our globalisation endeavour are
likely to ensure that we emerge more sustainable, enhancing value, recall and respect.
This is more than a tactical call; this is our strategic direction to emerge
world-class in spirit, presence and influence.