labels: industry - general, carborundum universal
Cumi''s golden runnews
15 September 2004

As a student, forty eight year old chairman of Carborundum Universal was a sprint champion. Venkatachari Jagannathan relates how MM Murugappan is still a champion

MM MurugappanAt Lawrence School, Lovedale, Ooty he was a sprint champion. He used to fly out like an arrow from a bow to finish ahead of others, recalls one of his schoolmates.

That sprinter boy MM Murugappan is the forty eight year old chairman of the Rs314 crore turnover Carborundum Universal Limited. And it goes without saying that the company - also known as Cumi- is far ahead of the others in the race for leadership in the Rs650 crore domestic abrasive industry.

The Indian abrasive industry has only two big players — Carborundum Universal, Grindwell Norton Limited (turnover Rs254.5 crore). Smaller players service nearly thirty per cent of the market and imports account for around Rs72 crore.

"All these years we have been quietly successful and have consolidated our operations. Today the business is poised in an interesting fashion. And now it is time to expand beyond our shores," remarks Murugappan.

Carborundum Universal is in three business segments viz abrasives, bonded and coated; ceramics, industrial and super refractories and electrominerals, raw materials for the abrasives.

The users of abrasives range from simple painters using sand paper to industries like automobiles, white goods, construction using grinding wheels, scrubber pads etc. The user industries for industrial ceramics are coal washeries, ceramic tiles, power distribution equipments and organisations like the Indian Space Research Organisation.

According to Murugappan, the expansion would come organically or even from acquisitions. Undoubtedly acquisitions would be more exciting for the company that is celebrating its golden jubilee.

Ramesh AgarwalAdds managing director Ramesh Agarwal, "After 1978 every two years the company is in the news either for setting up new plants or entering into joint ventures or acquiring companies."

Dividing the company's existence into two phases, the backward integration phase from 1954 to 1979 and technology absorption/strategic partnerships and business consolidation phase from 1979-2004, Agarwal says the company is planning to do investments in technology and accelerated growth.

Looking overseas It is apt to do that as the domestic market is growing and the global market is also looking at Asian countries as their sourcing point.

Globally the abrasives industry is in a consolidation phase but that is not happening here, except for the acquisition of Cutfast Abrasives Tools Limited, Chennai and Sterling Abrasives Limited, Ahmedabad by Carborundum Universal in India in 1996.

The company has chalked out a competitive strategy for all its business units - abrasives, ceramics and electrominerals which includes acquisitions both overseas and domestic. "We are looking for takeovers in Europe," says Agarwal.

In addition Carborundum Universal is also planning to expand its marketing set up in Europe, Asia and the Middle East. Setting up a manufacturing unit in Dubai and China is also under consideration.

Remarks Murugappan, "We are the only Indian company making inroads in the global abrasives and ceramics market through a strong foothold in Australia (through CUMI Australia) and the United States (CUMI America)."

The company earns around Rs30 crore from exports and the target is to increase this to 20 per cent of the turnover.

Acquisition plans apart, the other strategies are: investment in new product development in ceramics and abrasives; going up in the product value chain; unlocking capacity by debottlenecking the plants and right/down sizing work force.

Some of the plans have been implemented. For instance in the case of electrominerals division, Carborundum Universal has exited some of the low value products. The division also right sized its work force. Helping the division is the increase in price of imported brown fused aluminium oxide thereby strengthening the domestic position. During the first quarter of this fiscal, the eletrominerals division registered an impressive growth of 26 per cent.

In the abrasives division apart from product rationalisation, manufacturing was also consolidated. For instance manufacturing of all the polymer-based products shifted to Chennai. Similarly the manufacturing of all thin wheel products was consolidated at another city plant.

In the case of investments, Agarwal says that the plan is to put in Rs25 crore in the plants this year and a similar sum the next year. "The funds will be generated from internal accruals." A sizeable chunk of the investment, around 8-10 crore, will go into the company's Hosur plant that manufacturers abrasives and ceramics.

While at the market place the competition is tough, a series of measures initiated by the company last fiscal like matching the competition's price, enhancing the product offerings and customer loyalty programmes, like the introduction of insurance scheme has helped the company.

Increased market demand from industries like automobile, auto components and construction have helped Carborundum Universal close the first quarter of this fiscal with impressive numbers. The abrasives and ceramics divisions logged 28 per cent and 14 per cent sales growth.

The company posted an after tax profit of Rs7.3 crore on a turnover of Rs76 crore. Deft management of finances has reduced the interest payout considerably to Rs61 lakh. Last fiscal the interest payout was Rs4.31 crore.

According to Muruguppan, Carborundum Universal apart from selling products also services the clients of its partners in other parts of the world.

Be that as it may, what is clear is that the sprinter has changed his pace in running the business. For him it is now a marathon with the track spanning over different continents.

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Cumi''s golden run