Financial Daily from THE HINDU group of publications
Wednesday, Feb 08, 2006
Sona Koyo plans Rs 400 cr for capacity expansion
New Delhi , Feb 7
SONA Koyo Steering Systems, the flagship company of the Sona group, today said that it would invest Rs 400 crore to expand capacity over the next few years to almost treble its turnover to Rs 1,000 crore by 2010,
"The investments will go towards Sona Koyo's current capacity expansion plans in its various facilities and new locations," said group Chairman, Mr Surinder Kapur.
He added that the company, which is eyeing a turnover of Rs 350 crore this fiscal, would firm up a funding plan for the proposed investments in the next three months, which could include dilution of equity.
"We have various funding options in front of us - internal accruals, debt, or equity capital restructuring," Mr Kapur said, adding that the group had Rs 100 crore cash reserves.
The promoters, who hold about 26 per cent stake in the company through family and associates, are not averse to diluting equity.
"If required, we will do so... as the company must grow. We do not mind having a smaller part in a big company rather than having a larger part in a small company."
As part of the expansion, the company plans to have capacity of three million pieces of manual steering gears, 5,00,000 units of hydraulic power steering systems, and 2,50,000 units of electronic power steering (EPS), apart from doubling the capacity of steering columns from one million parts.
Even as it is aggressively increasing installed capacity, Sona Koyo is stepping up its focus on foreign markets for growth. The company has also changed its logo to reflect the changing focus.
"As part of the group's globalisation strategy and to offer more efficient services, the group has incorporated a company called Sona AutoComp Inc in the US," Mr Kapur said.
The new company would serve as the sales hub for its US-based clients.
Sona Koyo is targeting Rs 300 crore through exports by 2010 from Rs 50 crore this fiscal.
"In addition to the US, the company would expand exports through its joint venture Fuji Autotech, France which caters to European and South American customers."
Sona Koyo has 17 per cent stake in the joint venture.
Mr Kapur also said that apart from full assemblies, the company was looking at exporting components such as aluminium castings and stampings. For this, it is scouting for a new facility in India, preferably in a SEZ.
As the company moves forward, it could also look at further sourcing from China, he added.
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