Chennai: Import substitution is what Rane Brake Linings strongly believes in, and the company is quite successful at it. It is all set to bag orders from Ford India and Toyota Kirloskar to supply brake linings for the Ikon and the Qualis. Disc-pad supplies to Mahindra & Mahindras Scorpio are also on the anvil.
Brake linings are the last item that foreign vehicle manufacturers generally localise, says Rane Brake Linings president S Sundar Ram.
Earlier the company was successful in converting Maruti Udyog and Hyundai Motor to use its brake-linings for the Esteem and Santro models, resulting in OEM sales going up by Rs 7 crore to Rs 28 crore.
The company also hopes to increase its sales to the Indian Railways further from Rs 27 crore clocked last fiscal. Ram says the railways has decided to use L (low friction) blocks in the place of cast-iron blocks. While our blocks are costlier than cast iron, the life span is five times more than the latter. Closing last fiscal with a turnover of Rs 107 crore, Rane Brake Linings became the first company in the friction material to cross the Rs 100-crore sales mark. The turnover comprises: OEM: 27 per cent; replacement market: 47 per cent; railways: 21 per cent; exports: 5 per cent.
The after tax profit for the year stood at Rs 20.6 crore up from Rs 6.1 crore registered the earlier year. The bumper profit is due to Rs 13.3 crore under the head other income.
Rane Brake Linings general manager (finance) T S Sankar says the profit on sale of investments is Rs 9.4 crore. Last fiscal the company sold its stake in Rane LuK Clutch to LuK GmbH, Germany. Consequently the company has declared a dividend of 100 per cent.
Even if one removes the profit on sale of investments (Rs 9.4 crore) the company has posted an increase in operating profits, says Sankar. But for the increase in selling expenses the company has been largely successful in cutting costs.
The increase in selling costs is due to our exploring new markets, Ram adds. Currently an insignificant player in the overseas market, Rane Brake Linings is looking at exports seriously. Ram says his company will soon start shipping to Daimler Chrysler, Indonesia. All these years we focused on the large domestic market and that fuelled our growth. Now we are expanding our presence.
With three plants (located in Chennai, Hyderabad and Pondicherry) the company is the domestic market leader in commercial vehicle and passenger car segments with 70 and 80 per cent shares, respectively. Rane Brake Linings commands a 35-per cent share in the replacement market.
Last fiscal we increased our prices at the retail market and the move has resulted in better sales. We are now in the process of creating brand equity at the retail level, says Ram.
At a time when foreign companies are hiking their stakes in their Indian joint ventures, Ram dismissed the idea of Nisshinbo Industries, Japan, the technology and equity partner, hiking its stakes in the company. Nisshinbo currently holds 10 per cent in the Rs 3.6-crore equity of Rane Brake Linings.
Responding to the query about the companys move towards quality and efficiency improvements, citing competitor Sundaram Brake Linings quest for quality and efficiency, Ram says: Our aim is to bring down the TQM rejections to 0.2 per cent from the current levels of 1.2 per cent and customer returns to nil. Our focus is to have all the testing equipment in-house, even if the same costs us dear.
Rane Brake Linings recently installed rail dynamometer at an outlay of Rs 3 crore to test brake blocks supplied to the railways.