We are working overtime with our OE customers and media supplier's to develop new high-efficiency and high-capacity filters which are a must for new generation engines as reduced clearances to meet stringent emission norms are putting extra pressure on much better contamination control, otherwise engine life will get reduced significantly resulting in high warranty costs, says Manjit Prabhakar, Managing Director, Filtration Effects. In an exclusive chat with Agith G Antony, he provides a bird`s eye view on the filtration industry. Excerpts from the interview.
What is your take on reverse engineering in filtration segment?
Filter manufacturing being a low investment and much simpler process, always attracts a lot of competition. There are approximately 1,200 filter manufacturing units in India, most of them are in unorganised sector and develop look-alike products with reverse engineering without having much insight into filtration science. They are mainly active in the aftermarket business where we do not have any presence. We are only an OE focussed company with no plan to enter the aftermarket.
What gives Filtration Effects an edge over the competition?
Our competition is with the 15 main companies who are in organised sector, out of which 80 per cent are MNC-Indian joint ventures where foreign collaboration is not passing on any technical input as they have a policy to give technical input. These companies are technical knowhow deficient and mainly work on indigenously developed technologies. We give them tough competition in all segments of diversified industrial business. We have grown at a very rapid pace in last years as OEMs have much more confidence in our technical capabilities to deliver cost effective filtration solutions suitable to Indian conditions.
What is happening on the R&D front?
Our R&D activities are mainly focused on enhancing the life of existing oil and fuel filters to double the life and also enhance initial filtration efficiency significantly, keeping the size of filter same so that the end customer gets maximum value for money. Service intervals have become enhanced from 250 to 500 hours and in some applications it is getting increased up to 1,000 hours.
Our R&D has developed a new generation water separator system which is very effective in tropical Indian conditions to arrest water ingression in the system which makes the system prone to microbial growth and results in depletion of oil/fuel additives and properties which may cause catastrophic failures. We are also working with media manufacturing companies overseas to develop high efficiency triple life oil and fuel media with advanced resins which are high performance and environment friendly.
What are the major challenges Filtration Effects faces in the development of filtration media?
Filter media manufacturers in India are still working with 30 years old technology and offer only a few selective automotive filter media grades; not much updation has happened in the past or much planning been done for the future. This is because media manufacturers being Tier-2 suppliers has no direct interaction with OEMs and end users, due to which need to develop next generation products does not get generated; they go by the aftermarket demand, hence need to invest in R&D are not generated at par with foreign manufacturers and investment in R&D is not felt. About 95 per cent of filter manufacturers are aftermarket suppliers and lack knowledge about media hence do not work closely with media manufacturers to develop new media.
Media manufacturers in India only manufacture media; resin impregnation is done by different suppliers whereas good media is a combination of paper and resin, hence there is no co-ordinated effort from them in developing new media gets initiated.
We are Tier-1 suppliers who work on advance filtration with significantly low volumes to generate interest in Indian media manufacturers, to invest in R&D. Hence, we prefer to import, which is costly for end user. These conditions are changing fast and in another three to five years' time, I visualise a change in this scenario.
How environment-friendly is the Filtration Effects range of products?
We are using new generation imported media which are environment-friendly. So are our adhesives all of which clear the N-Hepthane extraction test for environment friendliness. We have already switched over to environment-friendly CR-3 electroplating in components, although this adds up in costs a little. Preservation of environment is more important than cost incurred on it.
What is the impact of the economic slowdown on the industrial hydraulic filter industry?
The slowdown in the economy is affecting the overall industrial growth and industrial hydraulic filter demand is no exception as it is directly connected to the infrastructure sector which is significantly affected as most of the new projects are either moving slowly or are on hold due to soaring interest rates and the liquidity squeeze. The customer has become more knowledgeable in last ten years and is looking for solutions suitable for Indian conditions rather than importing readymade products more suitable to foreign conditions.
Recession time is always the time to revisit R&D priorities and to focus on new products due to reduced market pressure of supplies. It is the time to understand the changing preferences of the end user and develop and offer new products which enhances value for money. Fortunately for us, Indian OEMs are now more focussed on experimenting with new products/ideas.
Tell us about your performance in the last two quarters.
The last two quarters turned out to be a very high growth period for us. We have grown ahead of the market in the last year. Our growth trend is continuing well and we are coming up with two new plants, one in Derabassi which will start production in August 2013, and the other in Pantnagar, Uttrakhand, where tax exemption is applicable up to 2018. This plant is all set to start production by September 2013.
The slowdown in industry has given us enough opportunities as OEMs are very interested in our value added products. They are relatively free from market pressures to evaluate and experiment to provide added advantage to their end customers. This turned out to be a big growth enabler for us as we have picked up more projects in the last two quarters which will further speed up our growth trajectory way ahead of the market.
Has inflation and devaluation of Indian currency adversely impacted the industry?
Yes, the cost of import of paper has gone up with devaluation of rupee; rubber and adhesive being petroleum products have also gone up significantly, resulting in reduced margins; increased diesel price has affected the freight cost, too. The customer is reluctant to compensate. The only option left is to cut waste from products and processes for survival and growth.
What is the overall demand-supply scenario?
The overall demand has reduced for industrial filtration products in the current depressed market scenario, by approximately 20-25 per cent. The most affected sector is hydraulic filters for steel plants and also the machine tool segment. Filtration demand for construction equipment sector is 10 to 15 per cent down despite products being pushed into the market by OEMs to generate demand.
What is range of products offered by Filtration Effects?
We offer double life oil and fuel filters for truck, tipper and off- road vehicles segment and have enhanced the life of hydraulic/transmission absolute rated filters to 1,000 hours to give customer more value for money. We offer high efficiency air pre-cleaning system as a retrofit which is very effective in very dirty conditions.
We also offer filtration solutions with electronic clogging indicators in oil, hydraulic and transmission filters to eliminate filter working in bypass mode which reduces the life of engine/system significantly; it will help the end user differentiate between a good genuine OE filter and poor quality/spurious filter. We also offer good quality air-breathers for usage in oil/hydraulic and transmission system which stops entry of moisture and contamination in an otherwise closed loop system.
Has there been any impact on your business performance from unrestricted imports?
With the devaluation of rupee, imports in any case are becoming costly even from LCCs. Moreover, we are a niche market player; hence cheap imports have no impact on our business performance.
Give us a brief on your manufacturing facility.
We have a fully integrated state-of-the-art filter manufacturing facility in our current plant in Database. We are going for multi-fold business expansion and setting up two new plants in Derabassi (Punjab) and Pantnagar (Uttrakhand).
Have you launched any new products in the Indian market lately?
We have launched double life high efficiency filters for major OEMs and our high efficiency water separator system is under field trial by OEMs.