With engineering as its forte, the Nandas
of Escorts Ltd have embarked upon an ambitious drive to consolidate its
position on the Indian corporate firmament. There’s a well laid out plan (a lot
of which is still under wraps), and the company is extremely bullish about its
business prospects in the coming years. In an exclusive and extensive interview
India magazine, Nikhil Nanda, Joint Managing Director, Escorts Ltd
spelt out the innumerable ways by which he hopes his company will be among the
front runners in the race for corporate supremacy. S Sridhar, CEO of Escorts
Agri Machinery too chipped in with his critical views on his line of business.
Escorts Ltd is today a Rs 4,000 crore
company that primarily earns its revenues from agricultural tractors and
implements and construction equipment.
Around a year back the company merged a few of its group companies into
Escorts Ltd. These included Escorts Construction Equipment Limited (ECEL),
Escorts Finance and Investments Private Limited (EFILL) and Escotrac Finance
Investments and Leasing Private Limited (Escotrac). Escorts plants are spread
across Faridabad, Ballabhgarh, Rudrapur and Warsaw in Poland (Europe). The
different plants in Faridabad manufacture Farmtrac tractors, Powertrac
tractors, automotive parts like shock absorbers and crankshafts and railway
products. The Ballabhgarh plant is into
construction equipment, material handling and earth moving equipment. The
Rudrapur plant is solely into auto components. The plant in Poland makes
Escorts Ltd, which had once ventured into
businesses like motorcycles and healthcare, is today an extremely focussed
company. Everything about it smacks of a solid purpose. To ensure that each of the
company’s four core businesses does extremely well, the Nandas have hired top
notch professionals to head them. S
Sridhar, is CEO of Escorts Agri Machinery. He was earlier President, Bajaj Auto
and brand strategy has been his core area of expertise. GVR Murthy is the head
of Construction Machinery Business. He is the former joint Managing Director of
Tractors India Ltd and a man with loads of experience. Lalit Pahwa heads the
Auto Components Business. He comes with vast experience, having worked with the
Tata group. Dipankar Ghosh who heads the Railways business is an ex Indian
Railway Service Officer. He was the Vice President of John Deere.
“Empowerment is my motto for building Escorts. I am looking at
people of any age as long as they have passion.
As long as they have competence and they have the fire in their belly,”
says Nikhil Nanda. The young Nanda insists that the core competence of Escorts
is engineering. “Engineering is the fabric, the architecture, the learning and
the legacy of what was embedded by the founder Chairman HP Nanda. From the core competence we have the bi
products. These are agriculture, construction equipment, railways and
automotive products. From the outside Escorts is viewed as a tractor
manufacturer or a railway equipment manufacturer. But the fabric is engineering
which is our core competence,” he notes.
Nanda is looking at agriculture and infrastructure as two large
segments of growth. Within agriculture, tractor is one piece. “We are looking
at entire crop solution. For the last four decades we have been looking at
tractors. Now the focus is evolving towards crop solution. We are looking at productivity from all
aspects and more so from the customers’ point of view. We are looking at end to
end, possibly all mechanised products that he would probably use when he looks
at yield. The agriculture story at Escorts is being defined very explicitly as
to from this core competence of ours we can value add,” Nanda adds.
The blue print for Railways is interesting, according to Nanda. The
company is spreading its presence into Metro Rail. “A lot of product tie ups
are happening. We make brakes, couplers and shock absorbers. We are getting
into three or four new products. We are
tying up with companies in Europe and introducing some high end technology to
the Indian government,” he informs.
Nanda admits that the company’s strategy in the auto business was
wrong and hence it lost a lot of money in the last three years. “The strategy
is again focussed towards going at the high end. This is taking shape. In the
last 12 months the money that we were losing has come down by 60pc and within
two months we should get into profit mode. We are looking at the Ducatis, we
are looking at the European markets and the South American markets. We are
looking at high end shock absorbers and other parts. Who knows we may look at
contractual manufacturing for European companies of shock absorbers to begin
with of companies of high repute. The
cost of that part could be the cost of the cheapest bike in India. We are
moving up the value chain,” he adds.
FARMERS’ BEST FRIEND
Nanda points out that his company has over the past two to three
years done an extensive research in understanding the cultivation patterns in
the country—the kind of crops that are grown, the kind of soil across different
regions, etc . The company has mapped the entire process of some major crops in
terms of what farmers do to prepare the land, cultivate the land, harvest the
crop etc. “In each of these layers we want to see what technology and
mechanised products we can bring in. In the last three to four years we have
looked at bringing in partners, products and technology which is being married
to the specific requirement of that specific core value add that the customer
is looking at. And each of the processes is very intelligently stitched to give
an overall experience. Today if you are a farmer and you have a piece of land
and you want to grow you will have to go to multiple partners and manufacturers
to get what you need. Escorts is now saying that not only will we give you
mechanised products which are world class but we shall also bring in soft
knowledge. We have picked up a lot of this knowledge from different countries.
We picked up certain themes from South East Asian countries of practices which
are very different to what we use in India,” he explains.
Escorts is combining its products with the practices that it have
learnt from abroad and is bringing these too India. This is going to be its
USP. “Our objective is that we want to become the farmers’ best friend. We want
to hold his hand. We want to value add at every stage and in every process and
give him the equipment and the advice he needs, so that the overall experience
becomes the whole sole experience,” says Nanda. The company has done
experimental sites down south. It has invited scientists, farmers and experts
and got their views. It now hopes to
cascade this model across the country.
As part of its strategy to provide crop solution to the farmers,
Escorts would not only be into tractors but also several other products related
to agriculture. The company is going to come out with products within the farm
community. Within the tractor industry, the company is also looking at the high
end market. The company has two tractor brands-- Farmtrac and Powertrac. There
is a clear distinction between these two brands. Recently, the company
announced a tie up with Ferrari tractors. “Escorts will be in the tractor
business the most profitable company in India by 2015. Even in the last 12
months when the markets were going through difficulties, we have taken our EBIDTA
up from 4.3pc to 10pc. We are looking at making our organisation lean and intelligent,
creating more flexibility and becoming more frugal. By 2020 we would like to
look at ourselves as a clear No. 2 in terms of market share. The journey is
already showing results. Our margins in Escorts Agri Machinery are on the rise,”
FASHION QUOTIENT AND
“Farmers’ friend is a philosophy as Mr Rajan Nanda keeps telling us.
Crop solution is a serious business,” says S Sridhar who heads the agri
business of Escorts. Sridhar is betting big on the fashion quotient of tractors,
among other things. “Look at the way in which the cars and bikes have gone up
in terms of fashion quotient. Tractors in the meantime were looked upon as
elementary in design but sturdy for rough use. The farmer is also seeing the
way automobiles are evolving in the cities. For him the tractor is nothing but
an equivalent of a car. The entire approach towards the tractor has to undergo
a change. The starting point is the fashion quotient itself. Many of the
existing designs are very monolithic. There is virtually no branded
differentiation. The high end tractor has to be unique, aggressive etc. The
black one on display at our office presents that philosophy. Three years later
you will see a far superior manifestation,” he points out.
Sridhar says his company will be surrounded by world class brands. “One
such thing is Ferrari. This may be too expensive, too niche, not affordable for
a lot of customers. We are going to bring many of these niche products into
India. First to the market is our philosophy. We shall be going to Korea to
bring in a brand but it’s too early to discuss that. Why just one colour on a
tractor, why cannot it be shades of black and chrome. This will be priced Rs
30,000 to Rs 40,000 more than its equivalent spec tractor. The initial response
has been very good. We are only showcasing to people. There’s a huge rural
youth wanting to catch up and be part of evolution of Indian society. As an industry very less things were done to
them. Our attempt is to be on the forefront of this industry,” Sridhar adds.
MECHANISATION IS THE
Sridhar says that somewhere someone has to bring in the change
instead of blaming the society. “A man should not do drudgery. What he cannot
do and what he should not do in the farm sector is what we are trying to solve.
What he cannot do is precision. Picking and dropping seeds is precision. For example, one kilogram of tomato seeds
consists of lakhs of seeds. The seeds are expensive. It needs precision picking
and dropping,” explains Sridhar.
“What he should not do is drudgery. Mechanisation will relieve him
of drudgery as well as ensuring precision. These two will form part of our crop
solution. The conventional way is to put a tractor in the middle and surround
it with different equipment. We are doing it differently. We put a crop in the
centre. All mechanical solution around
the crop is what we are trying to master, including the land preparation,” he
Echoing Nikhil Nanda’s views, Sridhar notes that his company,
instead of targeting the bottom end of the pyramid in India’s tractor market, will
do so of the developed world. The bottom of the pyramid in Europe is actually
the top end of the Indian pyramid. “We shall be attacking the bottom of the
pyramid of the developed world. Bottom
of the pyramid of Europe will mean a lot of money for me. We have a plant in
Poland which we shall use. We shall build capacities,” he reveals.
Sridhar further elaborates that mechanisation will come handy all
across India, as there is an acute shortage of workers in several parts of
India.” In the rural space a huge revolution is taking place. There are no
workers. The mechanisation space is huge opportunity for companies like
Escorts. Productivity increases with mechanisation. This is huge business
opportunity. We have not even scratched the surface,” he feels.
“The European and US markets are looking at 100HP and above up to
220HP tractors That is very high end. What we call high end is 55HP and above.
This is the bottom end of the pyramid in Europe. In India over the last 15
years, the 50HP and above segment has been growing from a 7 pc to a 14pc. This
segment will increase substantially. We
want to be No. 1 in the premium segment. Escorts wants to be No. 1 player in
the premium segment that constitutes 50HP and above. And this segment will
automatically flow into the rest of the global markets,” states Nanda.
If Escorts has aggressive plans for the agri sector, it has
aggressive plans for the infrastructure sector too. “At Escorts we strongly
believe that ‘E’ is for engineering and ‘E’ is for excellence. By 2030, India and China are going to
dominate the world economy, both from the sheer size of agriculture and
infrastructure. We are going to be one of the largest participants in this
space,” says Nikhil Nanda.
The company is broadly into two segments within infrastructure. One
is the material handling segment. Here Escorts is No. 1 in terms of market
share. The company has 51pc market share. “We are leaders today in the country.
We are leaders in the pick and carry cranes from seven tonnes to 21 tonnes. We
have made very relevant products for large players like Reliance. A lot of our
safe cranes are being preferred in the Metro project, especially after the
spate of accidents that happened in the past,” says Nanda.
The second is the earth moving segment. The company is into back hoe
loader space. “If you have to be a serious player in the infrastructure segment
you have got to be leaders in this segment,” he asserts. Escorts back hoe
loaders are sold under the brand ‘Digmax’. These come in both a two-wheel as
well as a four-wheel drive. Escorts is the second company after Beml to have
conceptualised the product all by itself. The third company to do is Mahindra
which has also come out with a back hoe loader. “Escorts is going to play a
very predominant role in the infrastructure space. We are planning to get into
the high end space of slew cranes. These are specialised cranes in the 60
tonnes and above space. For high end we have tied up a company called Locatalli
from Italy. We want to position Escorts in such a way that we are known for
making specialised high end cranes and infrastructural products. Compactors are
an important part of our growth. We have products for a man building a house to
a man building a dam. Except for coal mining, we have all products for the
infrastructure segment,” says Nanda.
THE JOURNEY POST MERGER
Post merger, Nanda says, the goal is to become the most profitable
company. “We are making it lean. We have invested in the most sophisticated
ERP-- Oracle R12. We have merged the four departments at Escorts Ltd----Materials,
Finance, Human Resources and Manufacturing Excellence. We are reducing the
number of manpower. I want to balance the gender. I want more females to come
into the company. We are less than 1pc
and we want to take it up to a substantially higher number. I want women on the
shop floors and even at the board level. I am looking at flattening the
organisation and de-layering it,” points out Nanda.
Nanda is firm when it comes to his plans. He will use his premises
to do high end jobs. Over the next three to four years his company will be reducing
space as much as it would be building capacity. “Our tractor capacity will go
up from 92,000 to around 120,000 and beyond. Between 1/3rd to 2/3rds
of our premises would get vacated. The focus is on cash. We are getting people
to work on our knowledge management centre. We have partners coming in from
Europe both for the tractor side as well as the construction side. By 2020
Escorts has to get a rating of AAA. My job is to get the best pedigreed and the
best in class people. I want to be surrounded by high powered executives. The
decision making has to be based on processes. And that process has to have
clear benchmarks,” he asserts.
Nanda is not bitter of any of his past business experiences. Rather
he says he is proud of the company’s legacy and proud of all what his company
has done. “I think with pride I can say that everything that we did, we brought
in a lot of concepts, a lot of products, and lot of technology into India,” he
says. He is now relying on his crack team of CEOs to take his company forward.
And with people like Sridhar by his side, he can be rest assured that the dream
journey of Escorts has just begun.