Cover Report

varroc group SmartSmart initiatives,initiatives, GiantGiant stepssteps Report: P. Tharyan, Photography: Mohd. Nasir

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ot many in the Indian auto VECV and Daimler are the recent 20th of March. March 21, 1990 comes from passenger car more for technological purposes. components industry additions. The company has was when we did our first sale. lighting, 19pc from Polymer, 12pc Triom has plants in Turin (), N may have realised, won lighting and interior plastics So this is actually our 25th year in from Electrical and 11pc from and . Our larger but ()- business from VECV and interior progress,” says a delighted Jain. Metallic. Approximately 62 pc of interest when we bought it was based 8,000 crore Varroc Group plastics from Daimler. Abroad the the group’s total business comes the fact that it was a very sound headed by Tarang Jain has done company focuses only on lighting Varroc Group, a from international operations and company in terms of two-wheeler something what Tata Motors did for passenger car segments, diversified entity the rest from India. lighting and also that it had a plant with Jaguar Land Rover. It bought where it has won programmes with The Varroc Group is currently The group has three technical in Vietnam. The other plant, IMES, a company much bigger in size, Chrysler and JLR. into several businesses ranging collaborators—Mitsuba and was the first acquisition we did in took a very calculated risk and The group is now 25 years old from polymers, electricals & (in electrical) and Italy. It was the first acquisition we is today reaping the benefits of and Jain feels that luck as well as electronics, metallic and lighting. Scorpion Automotive (the latest did outside India. IMES runs large this acquisition. But Jain is not great focus on the business have The group business is broadly technical partner from the UK for forgings for Caterpillar and the oil & resting on his laurels; he is hungry helped him achieve success in divided into Varroc Polymers vehicle securities). The group has gas business. It is in a way the only for more and has set a target for these years. Looking back, Varroc, and Varroc . Varroc also a joint venture with Scarpa & entity which is non-auto for us. So his group, to reach a turnover when it started operations, had a Polymers has 11 Colombo for valves. Successful these two entities in Italy are of 20,000 crore by 2020. In turnover of 1 crore in 1990 that units, all based in India. In the area acquisitions include that of Visteon 500 crore, 4500 crore is the short, it means he has to achieve jumped to 100 crore ten years of electricals and electronics, it global lighting business, IMES and Varroc lighting systems and 3000 additional sales of roughly about later in the year 2000. But from has five manufacturing plants. In Triom. crore is from India,” explains Jain. 12,000 crore in the next five to 2000 to 2014, it grew to become metallic, it has eight manufacturing This year the group companies IMES was acquired by Varroc in six years. a 8,000 crore company. “It feels units of which six are based in put together will be doing about January 2007. “We have to look at inorganic very good to have turned 25 and it India and two are based in Italy. 8,000 crore in terms of sales. The polymer business entails growth always. This 20000 gives one a sense of achievement. Varroc Lighting systems (acquired Out of that amount, 5,000 crore manufacturing of air filters, rear crore is not going to be possible We have been able to reach this from Visteon) has one domestic would be from operations abroad view mirrors, seat assembly, organically so we are going to be stage and this size, which we manufacturing unit and six and out of this, 4500 crore will be painted fairing and seat cowl, It feels very good to have turned 25 and it gives one a looking at inorganic growth. We could not have imagined. Luck has international manufacturing units solely from the erstwhile Visteon HVAC components, rear quarter are going to look at opportunities also played its part but we have based in Mexico (1), (2), entity the company bought--Varroc trims and door trims. The sense of achievement. We have been able to reach this in India and abroad, we are been very focused on the basics, (2) and the US lighting systems. “It is a global electrical business consists of stage and this size, which we could not have imagined. definitely going to look at it for whether it is basic execution for (1). The Tri.O.M. 2 wheeler lighting company (Visteon lighting) with making digital instrument cluster, us to achieve the target in 2020. customers, financial discipline, business has four manufacturing plants in Mexico, Czech Republic, regulator rectifier, starter motors, Without inorganic growth in my etc. Those things have not been plants, one in and one each China and India. The other 500 opinion it would be difficult to compromised. We have focused in Italy, Romania and Vietnam. crore is from our two entities in achieve this target,” says Tarang and understood individual and The Visteon acquisition resulted Italy. One is called Triom (The two Jain, Managing Director of Varroc customer needs right from day in Varroc catering to global wheeler lighting business). Group in an exclusive interview one. The growth has happened companies like Ford, JLR, PSA We bought it with Motown India at his group through the inorganic route but it Peugeot Citroen, GM, Chrysler and headquarters in Aurangabad. is still a part of Varroc. Whether Volkswagen. Roughly 58pc The company that employs it is organic or inorganic, we of Varroc business more than 10,500 people has 32 have got an opportunity to take manufacturing plants of which 23 opportunities. We have made full are in India and the rest spread use of the opportunities we got. across various countries including Somewhere we have failed also Mexico, China, US and Italy. The and we have learned from those company has nine engineering mistakes. Not every acquisition centres worldwide with five of worked out for us. We have them in India. In India, Varroc is the tried some other acquisitions largest supplier in the two wheeler before but we failed. There industry riding on its diversified were always lessons to be product portfolio. Customers learned. Today almost 62 pc of include Honda, Hero MotoCorp, our manufacturing Bajaj, Mahindra, Royal Enfield business is abroad and Suzuki in the two wheelers and only 38 pc is space. In the four-wheeler in India. This is our segment it has Maruti Suzuki, Tata 25th year already Motors, Mahindra & Mahindra, which we end on Volkswagen, General Motors and Fiat as major customers in India.

The Varroc Group Head office in Aurangabad

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handlebar assemblies, catalytic convertors and the reason I feel we went to the second round was that flywheel magnetos. The metallic business comprises we were a strategic player. We were one of the only auto engine valves, 2 wheeler transmissions, hydraulic component players who they felt would be a good fit for components and forged and machined components. the existing management of the lighting business globally. Products include crank shafts, transmission That is the reason I feel we got into the second round. Once assembly, crank pins, cam shafts and links and we were in the second round then I became very serious,” rollers. In the lighting business, the company makes recalls Jain. a range of lamps for both four-wheelers as well as Then there was no looking back for Tarang Jain. He two-wheelers. began firing from all cylinders. He took a bit of risk too in Varroc group also has a small share of business terms of money. He was determined to go all out to win. coming from the aftermarket, Jain notes. In India out Jain roped in global advisors PwC and Bain Consulting for of Rs. 3000 crore sales, 2 pc is from the aftermarket his legal, accounting and business diligence. He also got in division. “That is an interesting business for us. The someone from the environment side so as to avoid being organised aftermarket sector is a tough market. saddled with environmental issues at a later stage. Further, There is an unorganised sector as well but we don’t Citibank USA was roped in as advisors for valuation play in that. In the organised sector it is not that and for helping the company bid correctly. “These were big and the kind of products we produce has some expensive. I would have probably been down 2-3 million limitations in terms of growth. At the moment it is at 2 US dollars had we not succeeded. That is the cost you pc of the India sales but it is an interesting business pay for betting if it does not work out. I just said lets go all for us. By 2020 when we reach a certain sales size out. Let me do my best. I wanted to be a global player and in India which could be around Rs. 10,000 crore plus that was my ambition. This was a good opportunity as it then the aftermarket should be around Rs 300 crore. was a very good product group. Lighting is the jewelry of It will still remain a smaller percentage even though a car. This entity of Visteon was number 6 globally with a it will grow. As you can see we are largely in the 6-7 pc market share. They were a global player with the B2B business. We are supplying to various OEMs in right level of technology and they had a very good global India and the world,” says Jain. Primary aftermarket customer base which could help us even with our Indian products of the company include 2W electrical and side of the business. It was something very exciting for us. electronics, engine valves, and exterior lighting I said lets go all out, what is the harm? If you want to do well you have to take some risks. So we went all out and Visteon Lighting, the big bite luckily we won the bid. In the sense that we visited every Explaining the reasons for looking at businesses plant, we created a positive impression as we brought in out of India, Jain says that since 1994-95 all auto all these advisors who were also marquee names and they companies saw a growth till 2008 when things felt that we were very serious. We increased our bid as well, started slowing down. “Around 2005 we got the so our bid was also much more interesting for them and sense that growth was slowing down, that is the they saw our seriousness in the whole exercise. Eventually reason we went outside India to maintain our growth we won the bid and acquired the company. There were and to de-risk from India. We went and bought IMES. quite a few companies involved in the bid,” Jain recalls Largely in India, 90 pc of our business was in the two gleefully. Eventually, by February end 2012, Varroc signed wheeler space. I had the vision to be a global player that binding MOU (Memorandum of Understanding) with in the auto components sector. In the two-wheeler Visteon.The rest, as they say, is history. space and the four-wheeler space it is very difficult The mega acquisition of Visteon Lighting gave Varroc to be a global player by growing only organically. The a global level of technology, access to global customers only way was through an acquisition. So right from and also global talent. “Today the kind of leadership which 2007-08 we were looking at a couple of companies, exists in this entity is also in a way, superior to what we mostly in the electrical field for a buyout. We looked have in India. India is a much younger country. It is an at global companies and then we got the chance in emerging market while USA and European countries are 2011, where we got a call from a financial advisor obviously more mature than what we are. There are a lot who asked us whether were interested in a global of things we learned which would help our Indian side of lighting entity. Then I went through the details and the business. Global talent, global customer bases, global the size was right for us. They were bigger than us at technology and also relatively low cost operations like that point of time. I was always wary of the price. It the Mexican plant which is servicing the North American was a bidding process where they contacted another business. There were no plants in USA and Canada where 30-40 people globally or maybe more. At that point the wages are higher. They were in Mexico which is a of time I was quite excited but at the same time I relatively low cost option. There were three plants in the wondered whether we can really afford it. We have Czech Republic which was servicing the whole of Europe. always been very financially disciplined. So I would , and Russia were all being serviced out not over leverage and buy anything. So what we did of the three facilities in the Czech Republic. China anyway was that we gave a very fair offer. I felt we would not is low cost. The manufacturing footprint was also very get into the second round of bidding with that offer. exciting. Everything was exciting and we were lucky to get The making of an engine valve Fortunately for us, we got into the second round and through,” says Jain in all humility.

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Early 2015, Varroc entered into a technical R&D to fund advanced engineering that will “In India if you have to see historically, the and computing technologies. “The biggest collaboration with Scoprion Automotive Pvt develop next generation products such as laser country has never really invested in technology, challenge is that this industry is not prepared for Ltd of the UK which is a leader in vehicle lighting, matrix LED headlamps, lightweight they have always relied on the easy way out the technology wave and those who invest in security. “At the moment it is for the two engine valves and powertrain components, like technical collaborations, agreements, JVs, this area will stand to benefit. Unfortunately very wheeler space, but they also do four wheelers. smart electrical systems, LED headlamps for etc. They never really invested in R&D. They few Indian suppliers have invested in creating We need to go into more advanced products 2 wheelers, fuel efficient powertrain systems, have enjoyed the profitability over the years. technology capabilities in the last two decades. going forward and we need to go in for these robust security systems besides others. Till 2007-08 I would say, we were also in the It is still not too late and collaborative R&D can kinds of tie ups. They (Scorpion) talked to “In our global business we are very well same boat. We realised we need to invest in forge the way forward as we are doing,” he other players as well but they found us to be equipped in terms of R&D. When it comes technology. But if you ask me how much is notes. the right partner. These kinds of electronics to the lighting systems and exterior lighting the investment in technology it would not be in two wheelers through security systems are for cars, almost 6 pc of our sales goes into more than 1 pc. Before it was less but today The mega target something of the future. In India, as you know, R&D. We are very much there. We have got it will be around 1-1.5 pc. We will probably On his group’s targeted sales of 20,000 crore two wheelers are the biggest form of mobility. every level of technology when it comes to be increasing these numbers with all these by 2020, Jain reveals, “You see that growth This is an industry which will not de-grow. That lighting like LED, Xenon, etc. What even the tie ups that we are doing and we are going is huge. We are betting big on India because is why Varroc in India is largely present more bigger players have is with us and we keep on for more advanced R&D projects now for the we are hoping that with this new government in the two wheeler space. Globally it is the working more on high level of technology and future of our products. Everything will not be in place there will be right policies and right passenger car segment but in India we are 90 at the same time we are working on what is done in house. Also, the increased demand reforms taking place. We also hope there will be pc in the two wheeler space. There are a lot of more important for customers like affordable for electronics and light weighting will drive investment in infrastructure which will drive GDP prospective customers. There is Bajaj, Honda, technology. So the whole focus is how to more systems engineering capabilities in Tier 1 growth and also drive the automotive market. So Hero MotoCorp, etc. we have approached a give these technologies at an affordable cost suppliers,” says Jain. if we are close to 20,000 crore we will be happy couple of people already and they find it very even to companies like Daimler. Daimler Speaking on technology Jain points out that and would have done a fantastic job to achieve interesting,” informs Jain about the scope of may be a premium OEM but even they want the company’s metallic division, which makes that. Each of our divisions has a strategy and his new business with Scorpion. more affordable solutions. So our objective is engine and transmission components has a lot they know which customers to focus in India or A robot at work in an engine valve facility come out with more affordable products for of scope for light weighting (hollow parts for abroad.” Research & Development, a the customers and is closely aligned to the example – the company is already developing Knowing Tarang Jain’s capacity to take risks, major thrust area customer needs and their individual needs and hollow engine valves). The Electrical division is his financial discipline and his foresight, it’s only R&D is an important thrust area for Varroc. develop products at their requirement and this developing systems (security, powertrain etc.) correct to assume that he will be meet his 2020 The company has increased spending in has to be affordable. by integrating wireless communication, sensing target with considerable ease!

Crankshafts ready for dispatch

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