Key takeaways of the meeting

INEL, part of TVS Group is a leading manufacturer of Electronic Ignition Systems for auto industry with special focus on two-wheeler industry in technical collaboration with Mahle Electric Drives Japan Corporation, Japan. The company currently has four manufacturing facilities in India at Ulveeranapalli (near Hosur, Tamilnadu), Puducherry, Rewari (Haryana) and Kagal Hatknangale (Kolhapur District, Maharashtra).

TVS Motor Company (TVSM), the main customer of the company accounted for 49% of the total turnover of FY18 up from 45% in FY17 due to the strong performance of TVSM in the market place. Greaves Cotton accounts for about 10% of the sales turnover of the company. Other key OEMs serviced by the company are Hero Motors, Suzuki etc. The company has already commenced supply to Honda Motors on a small way. In case of Suzuki the company is sole supplier but the base volume of it is very low and when Suzuki gathers volume the company will also gain.

As the Indian 2 wheeler market is on cusp of strong growth with increased penetration, the company will ride the growth. The company is earnestly working to increase the share of other customers (non TVS customers) to its sales turnover. The company is also developing new products such as Electronic Fuel Injection (EFI) and Integrated Starter Generator (ISG) and equipping other traditional products to meet BS VI standards.

All the global majors in Electronic Ignition Systems already have market presence in India and thus not expecting any new overseas entrant in the market place. The competitive intensity will continue to be there and the company has to be competitive enough to retain and grow the market share.

As vehicles become more complex and rely more on electronics, the trend of usage of electronic components in automobiles is gradually increasing and more electronic features are added irrespective of the models. The company is developing products to take advantage of this trend. The company is not looking at electronic components for futuristic passenger vehicles such as driverless cars etc., but gearing up to manufacture and roll out future electronic product keeping in mind new emission requirements.

The company is setting up an Advanced Engineering Technical Centre (AETC) at Hosur for which the land is already bought. This new Tech Centre has the mandate to provide contemporary solutions for two / three wheeler & GP Engines industry. The new AETC facility will become operational this year and help the company to commercialize various new products in the coming years.

Implementation of BSVI emission norms opens up greater opportunities even for current product offerings of the company apart from new products.

The EFI under development is for BSVI complaint vehicles and will start contributing only after the new emission norms come up for implementation. Nonetheless it opens up new opportunity. The company will continue to look at new products development with some of which will be a hit and some will be a miss.

The company continues to invest in modernization, debottlenecking and capacity expansion on continuous basis. Putting up an assembly plant will take just 3 months and once it could see demand it can ramp up the capacity.

The company has started to leverage the long standing relationship of Lucas TVS (LTVS) with customers. LTVS has introduced/referred some of its customers to INEL that has resulted in new business opportunities. Since LTVS is into 4 wheelers and commercial vehicles the company could leverage on LTVS customer base for newer business opportunities. The company is also leveraging LTVS strong footprint across the country numbering about 2000 outlets to enhance its after-market sale.

The company is also joint sourcing of key raw materials along with LTVS and that has resulted in cost savings in both import and domestic procurement.

The company has about 9% stake in LTVS. The cost of investment in LTVS was about Rs 28 crore and market value of it is about Rs 78.2 crore.

Supply to tractors is not a big business. Some low end product which was phased out by LTVS has been catered by INEL now.

Margin of electronics products, not necessarily to be higher than that of traditional products.

The Indonesian subsidiary set up to cater TVSM's Indonesian subsidiary is non operational and whatever earnings reported are due to exchange gains. The company is looking at some other domestic players for supply contracts if that not materialize the company will monetize the land whose value has risen sharply and recover the investment.

As far as Renewable subsidiary that operates a 10 MW biomass power plant at Hosur is strained due to low tariff rates less than the typical breakeven level of about Rs 6-7/unit for a biomass power plant.

Overall the company is confident of rising up to meet the evolving changes in the industry as well as enhancing its market position. The company is committed to enhance efficiency and productivity of business benchmarked to world class standards.