Tata Hitachi mulls indigenisation to up margins, cut imports
Hyderabad: Tata Hitachi Construction Machinery Co Ltd is contemplating indigenisation of some of its components to improve EBITDA margins and bring down imports, a top company official said here.
Tata Hitachi is a 40:60 percent joint venture between the Tata group and Japanese conglomerate Hitachi Construction Machinery.
Company's Managing Director Ranveer Sinha said that at present company's EBIDTA (Earnings Before Interest, Taxes, Depreciation and Amortisation) margins are on negative side.
He added that the company's market share which is currently pegged at 37 percent is under pressure due to increased competition from Chinese manufacturers.
"Currently, I must tell you, we are not EBIDTA positive. We are not positive so far because 50 percent of our components are imported and there is a sharp decline in the exchange rate of the Indian currency which has affected our margins.
"You cannot pass on that decline to the customers," Sinha told PTI during his recent visit to Hyderabad.
He however, refused to share margin figures saying that they are listed.
"We are also bringing some Japanese manufacturers to make products with Indian companies in India in order to bring down the overall cost and also save on transportation and duty," he added.
Replying to a query, he said the company is also looking at going to low-cost countries such as Korea and China for import of some of the components which are not critical.
"We are in discussions with some countries. In three years time-frame we have a target of reducing the import content from an average of over 50 percent (for some models it is as high as 70 percent) to about a maximum of 35 percent," Sinha hoped.
Tata Hitachi has a market share of about 37 percent. It hopes to increase this to about 42 percent over the next three years by launching newer models, Sinha said.
The excavator market in the country is about 15,000 machines in a year. It grew at the rate of 30 percent in the past. However, the market is decelerating this year with the slowdown of overall economy, he said.
On competition from abroad, Sinha said though Tata Hitachi is number one player in the Indian excavator market, the leadership is under tremendous attack owing to Chinese players.
"Chinese players are offering prices which are 25 percent lower than some of the manufacturers. As matter of fact some of the Chinese machine manufacturers have started manufacturing in India. But with new technologies we expect the market share will go up to 42 percent in the next three years," Sinha said.