Hoisting its way up

Hoisting its way up

“This is an exciting time to be in India,” gushes Tushar Mehendale, managing director, ElectroMech Material Handling Systems (India) Pvt. Ltd. (ElectroMech).

With the country’s gross domestic product set to reach U.S. $ 5 trillion by 2020, up from an existing level of U.S. $ 1.5 trillion, the growth opportunities that it throws up to all sectors is phenomenal. This, coupled with an  investment of U.S. $ 1 trillion towards infrastructure spending in the 12th five year plan,  will result in higher demand for all products required for the development and maintenance of infrastructure.  As a result, there is a strong growth potential for companies like Pune-based ElectroMech, which is a prominent player in the engineering sector, manufacturing and servicing industrial overhead cranes, gantry cranes, electric wire rope hoists and customised material handling solutions. It is currently the leading player in industrial cranes in terms of volumes (it manufactured 630 cranes in year ending March 31, 2011). It plans to further consolidate its volume leadership position by deriving better economies of scale and hopes to clock volumes of 800 cranes for the 2011-12 fiscal. “We see the main growth drivers to be the construction and power industry, which sit at the apex of the growth pyramid,” says Mehendale. And other industries that are directly dependent on these industries like equipment manufacturing and steel are also in a high-growth phase.

Get set go!

With the opportunities coming from various industrial sectors, ElectroMech plans to significantly diversify its product range within the overall realm of cranes. It has already started the process and in June 2010, the company increased its manufacturing capacity to 2000 standard cranes from 1000 standard cranes earlier. This was funded through internal accruals and bank debts.

The company is now actively pursuing opportunities coming up in the steel and other process industries. So far, it has established itself in the workshop duty cranes segment and now, through the association with its Russian partner Sibcranex, it aims to enter the process cranes industry. “We will soon be finalising orders for supplying hot metal handling cranes to different steel plants across the country. Also, we have now moved into the high safe working load cranes (in excess of 150 metric tonnes) used in process as well as heavy fabrication industry,” shares Mehendale.

Today, ElectroMech has grown to become a Rs. 200 crore company with 500 people on its rolls. From a manufacturing capacity of 50 cranes in the year 2000, the company has reached the current level through a very gradual and systematic approach to expansion.

The company also plans to expand its market base across different geographies like the East Coast of Africa, apart from consolidating its position in existing markets. It currently has a 100 per cent subsidiary in the Middle East in Dubai. Through this subsidiary it caters to requirements of the entire Middle East as well as Africa. The company has its strategic partners in Oman, Qatar, Saudi Arabia, Kenya, Tanzania and Uganda.

“We would also like to be prepared if any consolidation opportunity comes our way,” says Mehendale. And to fund its plans, Motilal Oswal Private Equity Advisors recently invested Rs. 45 crore in the company. “The funds raised through the private placement will be deployed in a multi-pronged fashion,” says the MD.

The journey so far

“ElectroMech was established by my father in year 1979 who grew the company to a level of Rs. 3.25 crore in turnover in the year 2000 with 80 people,” reminisces Mehendale.

With over 32 years of operation, the company scaled up to the next level when junior Mehendale took over its reins when he was just 24-years-old in the year 2000, due to unforeseen circumstances.  “I had practically no previous experience of running a business and it was like being pushed in the deep end of the pool and I was expected to learn how to swim.” The company also had to bear the brunt of industrial slowdown during the next two years. That is when it came up with newer products exclusively for the construction industry and it helped tide over the slowdown. Eventually, it tied up with ABUS of Germany for its standardised range of crane kits.

Mehendale also gives credit to his team which stood by him and the company through its difficult years. Today, ElectroMech has grown to become a Rs. 200 crore company with 500 people on its rolls. From a manufacturing capacity of 50 cranes in the year 2000, the company has reached the current level through a very gradual and systematic approach to expansion. “We increased our marketing network, expanded offices, expanded product range, improved market penetration and increased capacities to reach where we are today,” shares Mehendale. It has steadily built its reference lists and bagged blue-chip customers.

The company also found a severe dearth of after-sales support in the Indian industrial cranes industry as it was a low revenue generating business model and this was an aspect that a majority of the crane manufacturers neglected. “We wanted to ensure that the equipment in which the client has invested heavily delivers maximum uptime and also ensure a better return on investment for the client,” says Mehendale. And in 2010, ElectroMech started providing complete after-market services, breakdown services, spare parts provision and modifications required for cranes, hoists and related material handling systems of any make through its subsidiary Cranedge.

Not without challenges

Fluctuating commodity prices, especially steel prices, have a big impact on the company’s costing and pricing. And ElectroMech tries to hedge the fluctuations by effectively planning for its steel requirements and resorting to smart sourcing.

Another challenge that is a typical conundrum is, “What came first – the chicken or the egg?” “Clients expect the supplier to have manufactured a similar type of crane earlier before placing their orders. “How does one build up a reference list, if placement of the order is dependent on that very reference list?” asks Mehendale.  The company built its brand purely by its operations and continued improvement towards achieving excellence. “The real joy for us today, is that the very customers, who refused to even give an enquiry to ElectroMech 10 years ago, consider ElectroMech as the de-facto choice for their crane requirements.” Has the company overcome this challenge? Not really. It still faces the same problems as it is now entering the bigger league. But, it aims to continue with its policy of being ethical and perseverant and hope to win over the big league too.

Given the growth dynamics in India, the industrial cranes market is likely to post healthy returns in the near term as capacity enhancements and newer infrastructure projects get implemented. ElectroMech is all set to ride the growth wave in the industry and has processes in place to achieve their growth targets. Clearly, ElectroMech is at the right place at the right time!