Gildemeister AG, the euro 1.6-billion ($2.3 billion) German maker of turning and milling equipment, is planning a production facility in India to meet the growing demand for machine tools by a vibrant domestic manufacturing industry.
"We have earmarked an initial budget of euro 10 million (Rs.590 million) to set up a manufacturing base in India to roll out a range of CNC (computer numerically controlled) metal-cutting machines, lathes and tools/dies, with an installed capacity of 400 units per annum," Gildemeister board member Thorsten Schmidt told IANS here.
"As our machines can be used for dual-use technologies, we are waiting for clearance from the German government to go ahead with our India plans, including transfer of technology. We hope to set up the plant by 2009-10," he said.
The Bielefeld-based company has short-listed Bangalore, Pune and Delhi as possible locations for setting up the production facility and prepared a blueprint for building a modular plant for capacity expansion in future.
In the run up, Gildemeister has floated its Indian subsidiary - DMG India - to set up a technology centre in Bangalore, with an upfront investment of euro 7 million (Rs.413 million) to provide customised solutions to its customers in the Indian sub-continent and South Asia.
"The technology centre will have multiple operations ranging from showcasing our products and services to existing and prospective customers, a bonded warehouse for spares and components, a state-of-the-art training facility to impart specialised skills to engineers of our customers using our latest CNC machines," Schmidt said.
With prospects of India emerging as a manufacturing hub for capital goods and a plethora of electronic gadgets in the ICT (information and communication technologies) segment, Gildemeister is looking for a first-move advantage in setting shop before its German, Japanese and Chinese rivals plan similar production bases in India.
"Though we have been present here since 1999 through distributors, a sustained growth of 20-25 percent over the last five years has given us good volumes to justify a manufacturing base in India for consolidating our business and expanding market share in the face of stiff competition from Indian and other overseas players," Schmidt noted.
During calendar year (CY) 2007, the company sold 180 machines as against 100 machines in 2006. It has an order book to ship about 250 machines till date during this year (CY 2008), valued at euro 35 million (Rs.2.07 billion). Revenue from India sales was euro 27 million (Rs.1.6 billion) in CY 2007.
The company has supplied machines to about 6,000 customers over the last eight-nine years and had repeat orders from many among them.
Incidentally, some of Gildemeister's Indian customers such as L&T, Godrej & Boyce and Tata Industries cater to aerospace and defence industries, where its machines/tools can be used for dual-use purposes.
"Hence, we have to take official clearance case-by-case to ship some of our high-end CNC machines and tools to these customers and ensure our products are used for specific purpose," Schmidt pointed out.
Machine tools that are in demand for extensive use by the Indian manufacturing sector include those based on turning, milling, ultrasonic and laser technologies.
Though India's share of Gildemeister's global exports is a mere two-three percent, Schmidt is upbeat that the technology centre and a production facility within the next two years will double its share and catch up with China, where it has a manufacturing plant in Shanghai, with an installed capacity of 800 units per annum.
"Global exports account for about 60 percent of our annual revenues, with 30 percent from Europe, 24 percent from Asia-Pacific and six percent from Americas. India will be our second largest market in Asia.
"A manufacturing facility in India with 75 percent indigenisation will enable us to not only reduce the price of our machines by 30-35 percent, but also halve delivery cycles from four weeks and eliminate overheads such as shipping and transport costs from ports," Schmidt added.
DMG India Managing Director S.G. Narayan said with the opening up of the defence sector and the aviation sector flying high, the potential for machine tools and CNC machines would be about 25,000 units per annum over the next five years from over 10,000 units currently.
Indo-Asian News Service