Can you please tell us about Pennar's journey since its inception?
Pennar Industries Limited (PIL) was established in 1988 by Nrupender Rao, Chairman, and is currently spearheaded by Aditya Rao, Vice Chairman and Managing Director. The diversified engineering firm has capabilities in automotive components, railway coach and wagon subsystems, precision tubes, pre-engineered buildings, process engineering solutions and environment treatment solutions. The company primarily operates through its eight manufacturing plants, two engineering facilities, and sales offices across India and in the US.
The company has eight manufacturing plants in the country. Can you please tell us about them?
The company has manufacturing plants in Patancheru, Isnapur and Velchal, Sadashivpet in the state of Telangana, Chennai and Hosur in Tamilnadu, Tarapur in Maharashtra and Mallapur in Hyderabad. These manufacturing plants cater to a wide range of sectors with capabilities in custom fabrication, roll forming, pressed components, hydraulics systems, aerospace machining and assembly. We intend to grow its capabilities in all these verticals over the next few years.
Can you please tell us about company's operations overseas?
Pennar undertakes its US export initiatives under Pennar Global Inc (PGI). Currently 10% of the company's revenue comes from exports and most of the export revenue is from USA.
PGI's primary mandate is to enable geographical diversification with the key focus on export of engineering services to US. PGI, with its deep domain knowledge and mature processes, has capability to offer an end-to-end, integrated product engineering. PGI's current focus area for the export of design engineering services are Hydraulic Engineering, Structures, Electrical systems and automotive engineering. Pennar has vision of becoming a recognised global player and will expand to geographies such as APAC, Africa, Europe and the Middle East. PGI intends to have a manufacturing base in the USA by Fiscal 2020 and is exploring options for technical collaboration to enhance its product outreach. PGI also plans to offer pre-engineered building systems (PEBS) in Africa and the Middle East. PGI will also pursue inorganic growth opportunities either through joint ventures or acquisitions. Utilizing the latest MBS, Autodesk, STAAD Pro and Tekla 3D modelling software to provide a complete BIM compatible engineered package for class A structural buildings pre-engineered buildings, hybrid
buildings. It is growing at 50 per cent y-o-y growth and is expected to contribute about 10 per cent of FY19 revenues. With changes in taxation policies in US (25 percent imposed on account of section 322 and more Anti -dumping duties for China) India has an advantage with CDW in auto and export industry. We are planning
on expanding its tube revenue export backed by the increased capacity in Velchal plant.
The company has been thriving in the railways segment. Can you please tell us about some of the projects/orders that Pennar is working on in this regards?
The company is catering to various Metro rail projects by building the metro coaches shells for Mumbai Metro, Kolkata Metro, Delhi Metro. The Railways vertical has exhibited high growth in revenue in the past three financial years. This vertical consists of our Coaches and Wagon Components business. Our clients for Railways
business include Integral Coach Factory, Chennai, Modern Coach Factory, Raebareli, Texmaco Rail & Engineering Ltd., Kolkata, Hindustan Engineering India Ltd., Kolkata, Cimmco Ltd., Kolkata, BEML Ltd, Bangalore, etc. The company has invested significant capex in railways in terms of both capacity addition and product diversification.
Through its hydraulic cylinders' business, the company caters to varied industries. What has been the contribution of this business in the company's growth?
Our Hydraulic cylinder business is relatively small but is growing rapidly. We cater to both, the domestic as well as global demand for hydraulic cylinders that find applications in agricultural, forestry, construction equipment, material handling, tippers and trailers, aerospace and defence industries.
The current capacity is 75,000 cylinders per annum and we are in the process of setting up a new plant with higher capacity. The new plant will be equipped to produce 150,000 cylinders per annum with scope to expand up to 200,000 cylinders as the demand increases.
PIL has more than 25 domestic and global customers for hydraulics, including reputed OEMs, distribution and engineering companies in the world. Over the past two year, PIL has supplied more than 100,000 hydraulic cylinders to the end-users in the US market. The company is witnessing increase in demand and hence is doubling the capacity. PIL is augmenting the capacity in a new 45,000 sq. ft. state of the art plant at its existing Hydraulics manufacturing facility at Periyapalayam, Chennai. The plant will be fully equipped with complete infrastructure and best in class machinery and testing equipment to design, engineer and manufacture high quality hydraulic cylinders.
Also, can you elaborate on the company's business in white goods components manufacturing?
The average business of this segment is around Rs 2.5 crore per month. This comes from two major players in air conditioner compressors. We also export shells to USA and business in growing YOY. We don't manufacture shells for the refrigeration segment which is serviced by Chinese and domestic players.
Coming to the auto component segment - The auto industry is at the transitional phase. How do you look at the industry disruption caused by e-vehicles in the country? How is it likely to affect your auto business?
We serve auto electrical in 2-wheelers; suspension, chassis and brakes segments in automotive 4-wheeler segment. Pennar has started development work for 2-wheeler auto electrical products. As of now, we don't anticipate any product change in the other segments. Nor do we see any impact to our business.
In order to cater to varied industries, the company must have a strong R&D support. Can you throw some light on the company's R&D efforts?
Research & Development (R&D) plays an important role to us for innovation and new product development. Every business unit has product development teams in place, who will be scouting around the industry for new product identification. The plant engineering
team then develops the new products and submit the sample lots for approvals before going for the production.
Also, please tell us about company's expansion plans.
We are witnessing steady increase in demand across the business units and product lines. The company will meet the additional demand by expanding manufacturing capacity at the existing plants as most of our plant locations can accommodate the required expansion. Pennar Industries will be doubling tubes manufacturing
at Velchal plant, we will be doubling Hydraulic cylinder capacity at Chennai plant. Also, we are setting up solar panel plant at Sadashivpet, and enhancing capacity for our Railway business. All these expansions will be carried out over the next 2-3 years.
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