Venkatachari Jagannathan reports on the frenetic growth plants of the auto components maker.

Chennai: Even at 70, JS Chopra, president, Delphi TVS Diesel Systems Limited is all pumped up. For, his team and he are in the midst of implementing new strategies for the diesel fuel injection systems company at an investment of Rs500 crore.

Once these strategies are set in motion, they will propel the company's Rs400 crore turnover to Rs1,100 crore in four years.

Delphi TVS, a 52:48 joint venture between the US-based Delphi Corporation and Chennai's TV Sundaram Iyengar & Sons, manufactures rotary diesel fuel injection systems (pumps, filters and injectors) for diesel cars.

The new strategies can be broadly classified under - business de-risking, looking at global opportunities, and beefing up technical capabilities.

When one breaks the strategies into plans, what emerges is interesting. Delphi TVS is all set to enter newer market segments like heavy commercial vehicles, small engines, and the common rail diesel injection (CRDI) systems.

Breaking the shackles
Chopra does not agree that the continued focus on diesel car segment has restricted the company's growth. "When we started there was only the Ambassador car with a diesel engine. Now there are several models. The initial strategy has really paid off well."

However, its absence from the growing heavy commercial vehicles segment is quite evident as its competitor Motor Industries Company Limited (MICO, part of Germany's Bosch Group) enjoys near monopoly.

In the process, Delphi TVS was exposed to the risk of being dependent on a single market and on a single major client (Tata Motors Limited) for its business. Most of the company's production goes to Tata Motors' diesel vehicles like Indica, Indigo, Marina, Safari and Tata Ace.

Says Chopra, "Our new corporate strategy addresses these concerns. We are now targeting the commercial vehicles segment."

The company signalled its entry into the goods carrier segment as a supplier to Tata Ace. With that the company has hit a goldmine; it is the sole vendor for fuel injection systems for the Ace.

Following Tata Motors to Uttaranchal, the TVS Group company is also engaged in setting up a new greenfield unit at an investment of Rs40 crore. Once the new plant goes on stream early next year, supplies to Tata Ace will jump to around 2.5 lakh units per annum.

Delphi TVS is also looking out for opportunities to expand supplies to other vehicle manufacturers from its Uttaranchal plant.

Referring to the dependence on Tata Motors, vice president, finance and company secretary, MN Subramanian says, "For any Indian component vendor, Tata Motors is important for building volumes. The only risk is that we are restricted to supplying only for diesel cars."

To overcome this handicap, the company is extending its portfolio to tractor manufacturers like Escorts and Mahindra and Mahindra. From next year it will it will also begin supplying unit pumps used in single- and twin-cylinder vehicles.

However, the more exciting and lucrative part of the new strategic initiative is the Rs350 crore plan to start making the entire CRDI system at its picturesque Mannur plant near Chennai, which has a capacity to make 5 lakh pieces every year.

Sometime back, the company had started making the rail and filters used in the CRDI system. The initial supplies of the CRDI systems will go to Tata Motors and later to other vehicle manufacturers.

Says Chopra, "The CRDI technology has made the 'drivability' of diesel cars similar to petrol cars." According to him, diesel cars account for nearly 50 per cent of the new car registrations in Europe and India will not remain far behind.

Chips in executive NC Krishnakumar, vice president, " With the price difference between petrol and diesel, and the implementation of emission control norms, CRDI engines will gain ground." Already, new diesel cars being manufactured in India are being fitted with imported CRDI systems.

With business prospects ahead bright, the company has invested Rs 27 crore in valve-closed orifice (VCO) nozzle project, a high precision component. With test manufacturing already over, Delphi TVS will soon start commercial production.

According to senior executives, the company expects a steady growth in the diesel car segment. However, Maruti Udyog Limited and Hyundai Motors India Limited's plans to build diesel engine plants with large capacities would certainly hinder the business growth of Delphi TVS.

According to Chopra, the two car manufacturers will have their existing fuel injection systems initially. "Perhaps later we will get orders." A fuel injection system is a critical component and is normally custom built and, in the words of Krishnakumar, "In some cases engines are built around fuel injection systems."

With car manufacturers' preferences and the emission norms tilting the balance in favour of CRDI systems, what would happen to Delphi TVS' rotary fuel injection systems?

According to Krishnakumar, in terms of percentage in the overall diesel car market, the share of rotary fuel injection systems may go down, but not out of vogue, as other segments would continue requiring the product.

With its focus mainly on diesel engine, is there a possibility of the company looking at petrol direct injection systems, a technology that is slowly gaining ground in Europe?

Answers Chopra, "Petrol injection is an entirely different technology. We have no plans in the area."

Looking at distant markets
With the plans for the domestic market in various stages of implementation and quality systems having already been put in place, Delphi TVS is seriously exploring the possibility of becoming a production base for its US parent Delphi's global markets. (See: Filtering out waste with TPM).

"Talks are on and a clarity on the proposals would emerge only at the end of this year." Today, exports account for only a small percentage of its turnover. Speaking about the funding for the Rs 500 crore projects, Subramanian says, "A major portion of the expenditure will happen in the next two years when the CRDI production line is commissioned. The company's financial position is good - its net worth stands at Rs160 crore on our equity base of Rs8 crore."

Meanwhile, work on the company's Rs50 crore technical centre is proceeding at a brisk trot. According to Chopra, the centre would form part of the Delphi's global technology centres working on applications engineering. Apart from housing 200 engineers, the centre will also have a chassis dynamometer, cold room, common rail test bed and test rig.

The technology centre at its backyard would enable Delphi TVS develop technologies targeting newer market segments.