Sandvik being a niche player, we always try to make our products very successful and profitable to our customers. We sell more values than product and equipment in all our five business verticals. Any product from Sandvik is based on the rate of return for our customer, the performance that it can give and the productivity that it provide to the customer, says Raghavan Ramaswamy, President, Sandvik Construction. Excerpts from the interview.
There are a lot of structural changes happening in Sandvik. Even mining and construction are separate entities within the group.
Change is continuous and Sandvik will also continue to change over a period of time. This is very specific to why mining and construction have now become separate entities, simply because of more focus and attention. If you look at our past record, changes that have taken place have always been driven by market and customer need. We have found out that construction and mining customers are different, a few of them may be overlapping but their requirements when it comes to purchasing, equipment and investments, etc, are different. We thought it is better to have two separate organisations, fully focussed on the needs of the customer in that particular business, so we are able to keep our customers fully satisfied.
Our new strategy calls for participating and ensuring profitable growth for our customers and if we have to do that we have to be aligned and oriented towards our specific customer needs. To do this, it is very imperative that we are internally aligned that way and hence the change.
Sandvik recently announced ambitious growth targets for India.
Sandvik in India, as one single legal entity, wants to cross the Rs 7,000 crore target from the present Rs 2,800 crore, in three years. Looking at the current business scenario, the landscape of development possibilities in India, both construction and mining are two big areas which hold a lot of promises. If we are talking of 2013, construction is one big area where we see an opportunity for Sandvik to grow manifold, whereas mining has its own cup of woes at this point of time, but we are confident of a bright sky there, too. These two businesses will be the mainstay on which Sandvik in India will grow to its ambitious target of Rs 7,000 crore. Particularly in construction, I expect quite substantial growth. I think a reasonable tag would be a growth of at least 20 per cent.
Which are the major verticals in construction that will drive demand?
Mostly hydro-electric power; we expect the government to increase investments in power and that is one area where we will be participating in a very big way. Roads, there was a promise of 20 km a day and we look forward to that. We will love to have those figures on the ground, if not in early 2013 then later. Then of course, building construction, where ready mix and concreting will play a major role.
Another major area is the promising growth in the dimensional stone industry which is mostly export-dependent markets like China, Italy and the US. We do have a very healthy market share as well as a big clientele who are dependent on our equipment to increase their productivity. We have drilling machines, hydraulic breakers for primary and secondary breaking. Primary breaking in areas where drilling and blasting is not allowed for safety reasons, and breakers will play a major role. These are the areas we anticipate fast growth in.
How close are you to the set target?
We have a lot of action plans, strategy and vision to reach Rs 7,000 crore. Based on this vision, there are a number of action plans that have already been initiated or are under various stages of implementation. Our Managing Director, Ajay Sambrani, is fully involved in this; he is part of the global executive management team sitting in Sweden. That itself is a big positive step that our voices are heard; the need for the Indian market and Sandvik in India is heard at the highest level and so, we get things done very quickly internally. Secondly, India is a very important market for Sandvik globally. Sandvik's global success depends on a large extent to the success of Sandvik in India. That is where we draw our strength and resources to grow. But there are a number of initiatives already, works in progress and very soon the market will realise how we are going to reach the target.
It means more investment...
Obviously, we are talking about investments and when we do so in India, we are not only talking about land and factory, we are talking of research and development, engineering, which are all very strong points for us. Many other industries are already using India as their back office for their global operations. Being an engineering major ourselves, we should also utilise and tap the resources; sourcing of components for our global operations, sourcing of equipment for our global operations in India, sourcing of engineering talent for research and development, and using India as a possible training centre. There are a number of areas where investments will be made.
How do you view the competition in the drills and breakers market?
The number of players in hydraulic rock breaker attachments has been always like this for many years. Globally, as an international manufacturer of rock breakers for the last three decades and more, we have been experiencing this trend and have been tackling the challenges posed by these manufacturers. This is where a multinational organisation like Sandvik will be utilising its experiences outside India to help meet challenges within India. We are very confident as to how and where and what we will be doing to counter these challenges.
Hydraulic rock breaker attachment products of Sandvik Construction will play a major role in the coming years to increase our market share and presence and thereby, our turnover contribution towards our growth. We expect to make it big in roads in that particular part of the industry within India very soon. This will not only be in terms of marketing, but we are also looking at various other possibilities of local manufacturing, local support, and localisation of products as well and that will be part of Sandvik's overall map of investment planning for India.
What is the total market for breakers in India?
In India, unlike other fully developed markets, there is no single organisation or tool that can track in-bound or sale related things. So, you do not have a consolidated view on the number of breakers or potential for hydraulic breakers in India. Notwithstanding this, an approximate ballpark number would be around 3,500-4,000 breakers per year and it is likely to grow. We aim to have a lions share of this market.
Would you like to specify the share?
I would like to be the Number 1 player. That has always been Sandvik`s strategy in a particular market and product. Today, we are not in that position for that product line in India and we want to get there and as quickly as possible. Everything needed to do that is already on the way and we are confident that in a year's time, we will be in a much better position than we are today.
What about new launches?
Yes. We have very recently re-launched the Rammer brand in India. Rammer, one of the oldest manufacturers of breakers, was part of Tamrock, which Sandvik acquired. During one of the re-branding exercises, all products were branded as Sandvik; we have realised the customers want the Rammer brand back. Any change internally in Sandvik is driven by customer need. Also, we felt there was a very distinct need for the Rammer brand to be brought back and hence we have brought it back. We are ready to roll out Rammer products in a very big way. Rammer is one product range which has hammers from 3-tonne excavator weight capacity right till 1,500 tonne excavator capacity.
Is the range compatible with different make of excavators?
Yes. It is an exhaustive range with a very extensive knowledge base, new technology developed in fully developed economy, which will be made available in India immediately. That is what our customers can look forward to. The shift towards timely completion has necessitated high performing and highly productive equipment. That is where Rammer will play a major role. It is not the product alone but a complete package that surrounds the product in terms of aftermarket support, tools and facilities that are available, and most importantly, the intellectual knowledge that our people carry. It is our ability to provide complete solutions, the ability to teach how to get the maximum out of our products and thereby ensure timely completion of projects. I think these are all differentiators for us from the rest of the players in the market and that is how we will capitalise and grow in this market.
How do you tackle the cost pressures globally?
It has always been a challenge; even globally, there is a very high level of cost consciousness amongst customers. Probably in India it is at slightly higher levels than what we experience globally, but there is a downward pressure on cost. We have to improve our cost- efficiencies otherwise we will be left out of the race. Sandvik has a presence in more than one hundred countries and is in the unique position of trying to source various products, components and services from different parts of the world based on the best cost scenario and situation. If you look at India, Sandvik in India is celebrating its 53rd year. When you are present in a country for more than 50 years, obviously you have a lot of home advantages and we will try to draw resources from this. As we move along, many types of equipment or components will be sourced out of India for its global operations. We are already doing so but it will increase.
There are a number of projects that have been initiated to try and identify a product and within that product, which component can be sourced from which part of the world. Based on this study and analysis, the respective markets will get an investment and accordingly, development will take place. As I indicated earlier, R&D, engineering, local sourcing and purchasing, local manufacturing, etc, all these areas are being focussed on for India.
Is there any specific strategy for the Indian market?
When it comes to India, specifically on rising prices and competition, Sandvik being a niche player, we always try to make our products very successful and profitable to our customers. We do a lot of value selling. We sell more values than product and equipment in all our five business verticals. Any product from Sandvik is based on the rate of return for our customer, the performance and the productivity. We do not just sell a breaker or crusher or a drill, we sell a package which will ensure that the customers' requirements are met.
For example, most of our crushing plants are not readymade; they are tailor-made to suit customers` needs. We do not have a standard 200-tonne-an-hour plant. When there is a requirement, the process starts from our engineer visiting the site and analysing rock samples, looking at the topography of the land, doing a survey, discussing with the customer. We get involved very deeply in our customer`s operations, we understand him well, we realise where his needs and the bottlenecks are, the critical areas of his operation and how well we can support him. We have repeat customers and orders where customers come back to us very specifically saying Sandvik's performance and productivity is much higher compared to the rest. That is why we take pride in saying we are supplying world class products.
How do you expect 2013 to unfold?
We are always very optimistic. We expect 2013 to be far better than 2012. There is change that is taking place all round the country in different aspects of life. You have seen a lot of awareness coming in from the public on various issues; the public is not ready to wait any longer for developments to take place and they have now started demanding the same. So we expect there will be speed in implementation of infrastructure projects and we also expect the current government in power, or future governments that are likely to come in, to have no choice but to go forward with implementation projects and quickly.
We have seen very positive signs: the land acquisition Bill that is coming in and the implementation of the Infrastructure Board for investment. These are all positive signs in the right direction. We at Sandvik are planning with hope and optimism that everything will be bigger and better. Our plans are to cater to this increased market.
It is our ability to provide complete solutions, the ability to teach how to get the maximum out of our products and thereby ensure timely completion of projects.