“The new after-market brand launched by Schaeffler India in September 2020 has met with a tremendous response,” maintains Harsha Kadam, Managing Director. He adds, “A gamut of products targeting the after- market will be launched and the first product under this brand will be lubricants (engine oil, gear oil, grease, coolant and hydraulic oil). Although the lubricant market is crowded and highly competitive, we see tremendous opportunities for our new product as lubricants are essential for good performance of bearings. The lubricants will be manufactured in India, but the technology will be German.”

Analysing the company’s performance during the current calendar year ended December 2020, Mr Kadam reveals that on account of the outbreak of the pandemic, the company’s operations and financial performance were adversely affected during the first half (January to June). During Q1 (January to March), it declined by 10.4 per cent to Rs 928.5 crore as compared to Rs 1,172 crore in the corresponding quarter last year. The profit at net level dropped by 26 per cent, from Rs 106.18 crore in Q1 FY19 to Rs 78.35 crore in the same quarter this year. During Q2 (April to June), though revenues were marginally (1.5 per cent) better at Rs 1,116.17 crore as against Rs 1,100 crore, profit declined by 26 per cent, from Rs 111.4 crore to Rs 82.5 crore.

Attributing the drop in earnings to the “the unprecedented slowdown in the automotive industry,” Mr Kadam adds, “During the first half of 2020, auto OEMs cut down production significantly, which affected the entire industry, including us.”

However, things started improving very fast from Q3 as strong market recovery led to normalcy in operational performance. During the quarter, both automotive and industrial segments of the company have shown resounding performance, responding to strong demand from certain segments, especially the tractor, passenger vehicle, 2-wheeler, rail, industrial distribution and wind sectors. All business verticals, i.e., auto OEMs, auto after-market and industrial (both OE and industrial distribution/after-market) have performed well in Q3CY20 compared to the earlier quarter. All segments registered strong double-digit growth. Industrial growth was higher than the automotive segment in the Q3, and even better than auto OE and auto after-market.

“Demand recovery in Q3 has been good, and is expected to continue in Q4. However, the company approached the market for the new year 2021 with cautious optimism. While we expect the tractor industry demand to be strong going forward, the PV segment has to be watched out for, considering that it used to taper off after the festival season. The company continues with its efforts aimed at responding to the crisis with agility and ensuring business continuity with a cautiously optimistic outlook,” he says.

COST DISCIPLINE

According to Mr Kadam, about 11-12% of industrial is from railways, evenly spread between metro and railways. Strict cost discipline and countermeasures enabled strong results during the quarter. Some of the cost savings are sustainable. The company was agile and responsive to customers. Demand was quick and came at short notice. The company also faced some challenges in manpower and the supply side with vendors facing manpower issues. Schaeffler has started offering the BS-VI range of products, including gasoline engine products. Initially there were higher imports but localisation is going as per plan. The average content per vehicle is currently around Rs 3,600-3,700 per vehicle and the plan is to take it to beyond Rs 4,700 per vehicle. The company has products in all 3 segments — engine systems, transmission systems and others. In transmission, clutch performance was strongly driven by tractors.

“Various sectors are at various speeds of recovery. Cement and steel started to show recovery even though it is not at last-year levels. Mining is good, with coal production at lastyear levels. Auto-PV has recovered strongly while 2- and 3- wheelers are on an upward trend. In September 2020, 2- wheeler production crossed last-year levels. CVs are on recovery but there is a long way to go,” notes Mr Kadam.