KBX, the joint venture in which Kalyani Steels Ltd, Robert Bosch and Nabco of Japan hold a 26.7 per cent stake each, is setting up its third plant at Manesar near Gurgaon in Haryana to serve the just-in-time needs of the Maruti Udyog Ltd (MUL) line. Construction of the plant will begin next week and is expected to be ready by March 1999.

The plant, a modular assembly operation, will supply the complete wheel assembly to MUL. KBX is also attempting to hike its share from the present level of 56 per cent of MUL's requirements, KBX chairman BN Kalyani said at the company's 16th annual general meeting here on Tuesday.

KBX posted a maiden profit in 1997-98, wiping out its accumulated losses. It also declared its maiden dividend of 10 per cent. KBX reported a total turnover of Rs 124.46 crore (Rs 123.30 crore), gross profit of Rs 7.37 crore (loss of Rs 1.60 crore) and net profit of Rs 1.44 crore. The company is expected to maintain this performance in the current year, too.

The Gurgaon plant will involve an investment of Rs 2.5 crore, part of KBX's total capital expenditure of Rs 7.5 crore earmarked for the year. The company is currently operating out of rented premises and this facility is mainly an assembly operation, managing director Satish Sekhri said.

Kalyani noted that growth prospects in the automotive sector for the current year appear to be bleak, with lowered production of commercial vehicles and flat growth in the passenger car segment. For this reason, KBX has targeted the two segments of this market which have recorded some growth, tractors and motorcycles. This will also allow KBX to utilise its extensive capacities created at its Chakan plant, near here, which manufacture 2 lakh braking systems annually.

KBX has targeted the supply of wet disc (oil immersed) brakes for tractors and hydraulic brakes for motorcycles. Sekhri said all motorcycle manufacturers had displayed interest in it and are expected to have at least one model with hydraulic brakes. The Chakan plant would supply brakes for motorcycles while the Jalgaon plant would supply the tractors. Sekhri was confident that up to 20 per cent of all motorcycles would have hydraulic brakes in the next three years since these lasted much longer than the present mechanical brakes.

The export thrust, through partners Bosch and Nabco, is being explored and quotations were being checked. Kalyani pointed out that since this was a safety product, approvals for international markets would take longer. Export projections for the next three years have been pegged at $20 million.

INSIGHT

Making good use of excess capacity

The option of providing braking systems to the tractor and motorcycle segments in the automotive sector should definitely widen the product portfolio of Kalyani Brakes. More importantly, these are the only two segments which have witnessed some semblance of growth in an otherwise stagnant automotive sector.

This move will also allow Kalyani Brakes to utilise its extensive capacities created at the Chakan and Jalgaon facilities. However, the company would do well to keep costs down, as the price differential between a conventional drum brake and wet disc brake could act as a deterrent. This is where economies of scale would play an integral role in generating acceptability.