Tube Investments of India Ltd. (TII), a part of the ₹41,713-crore Murugappa Group, is planning to create six more divisions to insulate itself from the cyclical nature of the auto sector as part of its long-term strategy.
The long-term objective is over time build 10 business platforms each of which can basically have multiple divisions and basically focus on their own line of business, said Vellayan Subbiah, MD.
“We actually are working with some consultants also in terms of identifying opportunity areas to get into, and that helping us basically identify what we see as areas of greatest potential.”
Currently, TII has four platforms namely engineering, metal-formed products, mobility solutions and other businesses. Over time, it plans to add six more platforms, he said.
For the current fiscal, TII has proposed to incur a capex of ₹200-₹250 crore. TI-1 (core business) is looking at a growth of 6%-10%. It is starting its lean initiative next month.
“We need to kind of look at the next level of opportunity in terms of margin improvement in the core businesses. That is step number one. So that’s what’s going to spin off the cash. It will be used for TI-2 and TI-3.”
“That’s basically why we are seeding TI-2 and TI-3, each of these will then become scalable engines unto themselves. The idea with TI-2 is to build these new platforms, but these platforms won’t be ones that generate the revenue or the bottom line for us now.”
“We are investing in those platforms that 5 to 7 years down the line, it can keep our compounding rate at the same level. TI-3 will be kind of much lumpier. We will continue to look for opportunities there,” he added.
During Q3 of last year, TII had planned a three-engine model of growth with TI-1 comprising core business, TI-2 new step-outs and frontier businesses such as optic lens and EV three-wheelers and TI-3 inorganic growth and acquisitions.
On the EV three-wheelers, he said that it would be launched during the last quarter of the financial year. “But because of the COVID-19, it may be delayed by one more quarter. We may launch first in South India and then nationwide. We have not yet decided till now,” he said.