Rane Holdings, NSK build electric steering plant to serve Maruti

New Delhi: Auto parts company Rane Holdings Ltd and Japan’s NSK Ltd have built a plant in north India, which will initially make electric steering systems for a new model from India’s top car maker by sales, Maruti Suzuki India Ltd.

The plant, built at a cost of Rs37.7 crore, will have an annual capacity of 200,000 units by April 2009. It will be funded by Rs19 crore of equity, and the rest by debt.

“The first line is for a new model of Maruti,” Rane’s chairman L. Ganesh told reporters on Thursday ahead of the launch of the plant. He declined to name the model, citing the sensitivity of the information.

Maruti, 54.2% owned by Japan’s Suzuki Motor Corp., has plans to make 150,000 of its world-strategic A-Star compact cars from December, which will be exported to Europe first. It will then make the Splash wagon.

Rane NSK Steering Systems Ltd, the equal joint venture, also has plans to later expand the capacity of the plant in Haryana to serve new models from Honda Motor Co.’s Indian operations, Ganesh added.

The venture has two more plants, with an annual capacity of 800,000 steering systems, and is a supplier to Ford’s India plant, Tata Motors Ltd and Mahindra and Mahindra Ltd.

By 2011-12, Rane NSK will have sales of Rs200 crore, up from Rs58.1 crore in 2007-08, Ganesh said.

“In the next five years, (the Rane Group plans) a compounded annual growth rate of 15%,” he said. “It is our vision that 20-25% (of this) should come from overseas.”

In the year to March, the group’s sales were Rs1,400 crore. Exports made up 12% of that, Ganesh said.

Shares of Rane Holdings rose nearly 10% to close at Rs178 in a firm Mumbai market on Thursday.

The Rane Group, which operates through Rane Holdings, comprises eight firms that make auto parts such as steering and suspension systems, brakes and engine valves. Its largest exports are engine valves and steering joints.

In 2008-09, it plans to spend Rs200 crore more on expansion at various units, Rs40 crore of which will go into a new disc pad plant in Tamil Nadu, Ganesh said.

Margins in the year should be “slightly better” compared with the previous year, he said. “It is because of the new projects kicking in.”

But sharply rising steel prices are a concern, and they could erase any relief from a possible reversal of the appreciating rupee that shaved off margins last year, Ganesh said.

“This kind of steel, or any input cost, we have to recover from customers. This kind of increase, everyone realizes, cannot be absorbed.”