We Are Eyeing To Bring Medical Arm To India By 2020, Says Georg Graf, Freudenberg Regional Representative India
Freudenberg Group, which runs eleven business groups globally, is into multiple product lines like housewares and cleaning products, automobile parts, textiles, building materials, and telecommunications. In an interview with BW Businessworld, Georg Graf, Freudenberg Regional Representative India revealed that currently it is operating its seven business groups in the country and will be bringing in the medical arm in the next couple of years.
Tell us about the genesis of Freudenberg in India. Are you happy with the way things have shaped up?
We started business ties (in India) way back in 1920 when we began sourcing raw materials. Our official foray was in the year 1989. All the operative units came up after the 90s. I think if we reflect over the last three decades, it was a very interesting journey. Because the world has changed and so has India and so has the relationship of Freudenberg and India has changed. Just to give you a last year’s perspective, you can see how fast the movement of Freudenberg is. I think in the 90s, it was a very stable situation in Europe. With the falling of the Berlin wall, Germany has somehow reunified (with East and West Germany coming together). A lot of geopolitical crisis also came up impacting the (Indian) subcontinent. So from this end onwards, we have always (had) some disturbances. On the other hand, Asia has consolidated a lot. In the process, India got a very different perspective in Asia, along with China. So there were a lot of movements in a couple of years. If you see the last five to ten years, we have a very stable situation now. India has found a way to develop the society. Also, the economy (is booming) and it is time now to deliver. Our objectives in India are based on the fulfilment of our long-term commitment. (Although) we were present through the unofficial route for more than eight decades, we are having a sustainable success for sure in the country over the last two decades. We have fulfilled our targets so far.
What kind of long-term goals have you set for India?
All the businesses in India are somehow market leaders in their niches. They are specialist players and are at least second best. In the long term, our intention is to attain market leadership (in their respective segments). We want to be the best supplier (in India). Globally, we want to be the most innovative and efficient technology group doing business worldwide. India, as a part of Asia, will be a defined focus market for Freudenberg Group. As I have mentioned in the presentation (during the press conference), we even want to even somehow balance our portfolio with in terms of sales and also (in terms of) portfolio footprint with all operations with one-third of our businesses to Asia.
How much has Freudenberg invested in India until now? And do you plan to make fresh investments in the country? What are your plans for exports?
We have always invested in existing infrastructure. So we have revamped some of our facilities and have brought (them) back to a global level. So during the last five years, we have invested almost Rs. 500 crore. We have built five plants over the last couple of years. For example, we have built a speciality lubricant plant in Mysore for a total investment of about Rs. 150 crore. Today, we talked about the new investment in Chennai which is about (building a) Greenfield (facility) for which we are spending another Rs. 200 crore, which includes land infrastructure, building and machineries. So you can see that we have constantly invested in manufacturing sites in India. Not only on (manufacturing) sites but also (on) people. It is our natural belief that a make-in-India programme by the government could add a lot of value to the country and also to our activities. The share of exports (to total output) is rather small now because the domestic demand is very high. Freudenberg was always in India, for India, with Indians, to make in India for the Indian market. The domestic demand is so big that the focus will still be on India. For example, the upcoming plant in Chennai will mostly support Indian market in the hub of Chennai. As we have production facilities in all the continents, we normally want to strive for local production to minimise risks, transportation, etc. I think the more we can get raw materials in India, the more we can enhance our production, the more we can think about exports also. We have started some in our business groups to support Asian countries. For example, lubricants for cement firms go seamlessly to Malaysia, Thailand, Australia, Indonesia. Some of our filtration products are also serving some export markets.
Globally, Freudenberg is catering to various industries across multiple segments. Is the business model same in India?
Freudenberg is supporting more than 30 market segments with 1,000s of applications worldwide. We have 7, out of our 11 global business groups, in India. They normally have the same products, the same market segments and the same customers. We could have regionalised products but normally we have even global products available in India. So actually, the support for the customers is the same and a little bit smaller because we don’t have all the business groups in India than what we see in the global footprint. At present, the share of automotive (vertical) is higher in India than the global share. Freudenberg is pretty much into the automotive as 50% of the sales is associated with this vertical (globally). 45% or so (of the share) is with OEMs and 5 % is with aftermarket spare parts. But in India, it is little more than 60% (from the automotive vertical). A lot of technologies (and) markets are not available in India (as against) the markets we see in the other parts of the world. For example, we have one business group that is into household products such as brooms and bushes and so on. And here, we have an Indian JV partner, the Gala Household Products, which have a different product portfolio than the solutions that we provide in the Western world. However, our filtration solutions-PM5 services- that we provide in India is same as the rest of the world. If you see the contribution of the automotive market in India, it will grow faster than the rest of the world. So the Freudenberg Group will be more focused on Automotive than the rest of the world.
Do you intend to bring the other 4 business groups in India?
Out of them (4 business groups), we have one service business group i.e. Freudenberg IT Services, (which is) very focused to UP Systems. They are, most probably, nor discussed (for Indian market). We also have one Japanese Group i.e. Japan Vilene Company. Then we have two more business groups (which are not present in India). One is (into) Oil and Gas Technologies, the other is ‘Freudenberg Medical’. If you see how India is developing now as a medical hub, for medical devices business and for pharmaceutical business, you could imagine that this business group (of Freudenberg) has plans to come to India and we are in a strategic period. We have described the years 2018-20, (by when) this business group has plans to enter India.
As the Indian government is giving a lot of thrust on e-mobility, do you see enhanced business opportunities here?
I think the very first and clear statement is Freudenberg is supporting all four major drives-Internal Combustion, Hybrid, Fuel Cell, as well as the E-motor. We are also convinced that all four powertrains will remain together for the next decades. I mean in India, we are convinced that e-mobility will develop in a very different way. The e-mobility will develop differently in the region of the urban environment of Delhi and Chennai to the region of Himalayas. I think all of us can’t imagine a truck in the Himalayas will carry metric tonnes of the battery to go to Dehradun. So we trust into the Internal Combustion Engine to also remain (in the market). But the fact is we have solutions and support all four powertrains. This is one element. We support the (government’s) vision of 2030 that each car sold in India should be an electric-car. Although it is a good vision, it will not happen. Our view is that 30-35% (of total vehicle sold) will be a new powertrain. It may not be an ICE powertrain, it could be a Fuel Cell, Hybrid or a pure e-car. We are also convinced that the way to new mobility will not be revolutionary, but evolutionary. We know that it will happen but nobody knows when it will happen and how fast it will happen. We have to be prepared for that transition.
Please, can you share the Freudenberg India’s current and projected turnover?
Last year, the Freudenberg Group had a turnover of Rs. 70,000 crore worldwide, which is around 9.3 billion euros. During the same year, we earned Rs. 2,800 crore in India, which is around 275 million euros. This was 25% more than the one we earned in the prior year (2016). So what do the numbers say? We still have a long way to go to be the main contributor out of India. But, it will contribute heavily to the growth because we are growing by more than 20% over the last 6 year whereas the Group normally grows by 1-3%. And this will be sustainable. We want to grow by 20% (in an) organic (manner). So if we are serious, we will be able to double our sales in five years. By that time, we will be earning 10-11 billion euros globally.
