—Deepak K. Chhabria, Executive Chairman, Finolex Cables Ltd
With a standing of over 55 years, Finolex Cables is India’s largest manufacturer of electrical and telecom cables. Have started its operations with PVC cables for the automobile industry, Finolex has developed capabilities of producing extra high-voltage cables of as high as 500kV. Finolex is now strategically diversifying.
Deepak K. Chhabria talks more on how he wants Finolex to be regarded as a full-fledged electrical products company, and not just a wire and cable company. An interview by
Venugopal Pillai.
Finolex has been a pioneer and a household name in the PVC cables industry. How has the journey been so far, and how do you view the competition that has evolved over the years?
When the company started in 1956, the first product manufactured was drawn copper wires. Later, the same copper wires were bunched and insulated with PVC, and automobile wires made of PVC were produced. As time progressed, the company started manufacturing a very broad-based product range with the insulation type being predominantly PVC. Over the years, our company has diversified manufacturing products for various sectors like telecom, power, agriculture, etc. and the materials used are PE, XLPE, rubber, halogen-free compounds, etc.
Finolex has evolved as the most diversified cable company in India and competes with many companies in the different sectors. Cable manufacturing is a very competitive business, and technology and volumes play a large part in being competitive.
Looking into the future, while we will continue to grow in each of the established sectors by increasing capacity and market share in cable manufacturing, we are aiming to further diversify into manufacturing and marketing of transformers and electric motors in the near future. . Slowly and steadily, we wish to transform our company from a wire and cable company to an electrical products company.
Tell us in some detail about your joint venture with J-Power for the manufacture of EHV cables. When do you expect commercial production to start?J-Power Systems is Japanese company promoted in a 50:50 joint venture between Sumitomo and Hitachi. We have a JV with J-Power Systems in India called ‘Finolex J-Power Systems Pvt Ltd’. J-Power Systems owns 51 per cent of the JV but the management control is with Finolex Cables Ltd. The plant has come up at Shirwal, 60 km from Pune. The latest technology has been deployed in a vertical continuous vulcanizing (VCV) line installed in a 122m tall tower.
The plant, designed to manufacture power cables from 66kV up to 500kV, has already been commissioned; commercial production has also started. We have already manufactured cables from 66 to 220 KV and trials for 400 KV are underway. At full capacity of phase-I, this unit can produce a turnover of Rs.600 crore per year. The plant buildings and infrastructure has been designed to accommodate 3 sets of equipment and hence within five years, if all goes well, this plant is expected to achieve annual turnover of Rs.1,800 crore.
The EHV cable market is also getting competitive with several multinationals like Nexans, Prysmian, Brugg Kabel, etc planning to enter the market. How do you view the situation?
As said, we have tied up with J-Power Systems that has been a world leader that has constantly come out with new products in higher voltages over the years. It is also the first company to develop the 500kV power cable system.
With technology support from J-Power Systems, we will have an added advantage over our competition. Additionally, the JV has been set up to cater to the entire world market, except Japan. Our partners will help the joint venture export the products through their marketing networking into the rest of the world.
The Indian market in EHV Cables is growing and as the cities grow larger and develop further, most of the overhead high tension lines will need to be replaced by underground ones for safety reasons. This will create a large demand for our products in the years to come. The company is well placed to take advantage of the growing Indian demand as well as the export market as it is strategically placed close to Pune well connected with a highway to the Mumbai Port.
The low tension 1.1kV wiring segment is flooded with marginal players that allegedly produce inferior products and operate only in under-developed regional markets. What is your view?
This segment is highly competitive and is equally divided between the organized and unorganized sector. Though this product looks easy to manufacture, there is lot of technology in the insulation compounds which are key to the safety and current carrying capacity of the wire. Finolex manufacturers its own compounds and is always offering its latest products to its customers. We constantly hold seminars to enlighten all stakeholders including electrical consultants, electrical contractors and electricians so that they are fully aware of the latest trends and the capabilities of the new products. They can therefore guide the customers to use better materials from the organized sector than inferior products supplied by the unorganized sector.
Do you feel that the typical Indian consumer is progressively getting quality conscious?
Yes, I feel over the last few years there is a definite trend where customers are becoming quality conscious and are willing to pay a premium on the product since not only does this provide them with safety but also a longer life on the product, which if properly calculated is more cost-effective even though a small premium was paid in the initial installation.
International prices of copper are seen rising very sharply over the years. They are also known to be volatile. How do you deal with the situation?
Copper constitutes one of the major costs in the wire and cable business. International (LME) prices of copper decide the pricing in the Indian market as well. Copper is known to be volatile and we have no option but to pass on the increase or decrease in the prices of copper forward to the customer. We normally purchase copper on the average price for the month and try to contain the volatility to a certain extent. We change our end product prices only when the international prices fluctuate too much. We try to reduce the volatility as much as we can in the end product pricing but at the end of the day, the variation is passed on forward to the end customer.
For Finolex, how has been the relative performance of the electrical cables division vis-à-vis telecom cables, over the past few years?
The electrical business has been growing 15-20 per cent in the past few years. We have been concentrating on growing our network of channel partners and dealers all over the country. There has been a good demand for electrical wires and cables on the back of growth in the housing sector. There is a boom taking place in tier-2 and tier-3 cities as well creating this demand. If the power sector had grown as planned, the demand would have been even higher.
Due to various reasons, the telecom sector has been slow in the last few years. But the outlook is good. We have just recently expanded our fiber optic cable capacity at our Urse and Goa Plants from 6,000 km per month to 8,000 km per month and we are further expanding to 10,000 km in four months’ time to cater to this increase in demand.
The entry of Finolex in the wiring devices market was a logical step forward. How has the market response been to the “Finoswitch” range?
We have launched two separate ranges under ‘Finoswitch’. One is the ‘Çlassic’ range, which targets the mass market. It is semi-modular in design and comes at a very competitive price. The second is the ‘Premium’ range which is completely modular. Both the products are manufactured using high quality polycarbonate for high temperature and safety requirements. We are in the process of designing a third range which would be targeting the super luxurious category. We hope to launch the same by the end of this year.
We learn of your company’s early plans to diversify into transformers, electric motors and switchgear.
Yes, with an ambition to have higher growth rates, we have decided to diversify further into electrical products. We have short-listed transformers and electrical motors as an area for diversification where the demand will be high in the years to come. We are in the process of acquiring 30 to 50 acres of land near Vadodara in Gujarat where we would like to construct a plant for our new expansion into electrical products. We do plan to set up a separate dealer network for the sale of these products.
Finolex is also working on a separate Project for setting up a new switchgear division in this financial year which will manufacture miniature circuit breakers (MCB), earth leakage circuit breakers (ELCB) and their cabinets. We will offer these for sale from our existing sales network as the same customers will need to buy electrical wires, switches, CFLs and the above MCBs/ELCBs for their project requirements.
Though CFL offers much higher energy efficiency as compared with incandescent lamps, CFL penetration in the Indian market has been low, as we understand. How do you view the situation and the market response to Finolex’s CFL range?
A CFL Lamp offers much higher energy efficiency as compared to incandescent lamps, but also requires a higher investment of Rs.60-70 for a CFL bulb versus Rs.10 of a standard bulb. The penetration of CFLs has been growing over the years as the cost of the CFL bulb has fallen from Rs.500 to Rs.60. When you look at the savings offered in the electricity bills as well as the life of the product being much higher, the economics are clearly in favour of the CFLs. Finolex is offering a life of 8,000 hours in the CFL segment, compared with the competition that offers only 6,000 hours. This compares favourably with the life of only 1,000 hrs for a standard incandescent lamp.
How do you read the future of the Indian lighting industry especially with the advent of LED-based solutions? Do you have plans in this direction?
LED technology is also picking up in the world as well as in India as the costs have started to reduce. Finolex has recently launched LED based bulbs and street light fittings in the Indian market. The volumes will be very low in this segment initially due to the cost consideration but will grow in the future.
Please take us through your key future plans for Finolex with respect to electric cables, wiring devices and lighting products.
Finolex Cables’ two product lines are broadly electrical and communication cables. We also manufacture copper rods, switches and CFLs. In the electrical segment, we manufacture a range of products supplying to the housing sector, automobiles for wiring harnesses, flexible wires and cables for the panel industry, low and medium voltage power cables for infrastructure, winding wires and 3-core flats for the agricultural sector, etc. In the communication sector, we cater to the IT industry with LAN cables; cable TV business with coaxial cables; Telecom Sector with Copper JFTC and Fiber Optic Cables, etc.
We intend to grow in all these sectors and we are constantly innovating and launching new products in many of these sectors with the latest materials and designs of cable products. For example, in the automobile sector, we launched the high temperature thin-walled auto cables, in the fiber optic business, we developed and launched fiber-to-the-home cable designs and we also launched “speaker wire” used for broadcast announcement last year. We also extended our range of power cables to the EHV segment all the way from 66kV to 500kV, through a joint venture last year. In the last few years, we concentrated on developing the electrical switch division and the lighting division which we will continue to grow going forward. Our next focus is to concentrate on the development of MCBs and ELCBs this year followed by transformers and electrical motors in the following years.
What are your green initiatives?
We have planned to install a 5-mw solar power plant at our Urse facility near Pune at an estimated cost of Rs.40 crore. The proposed plant is expected to be commissioned in six months. Our consumption at the Urse facility is 7.5 mw and hence the power generated by the 5-mw solar power plant will be completely consumed in-house. This will also allow our company to gain firsthand experience in installing and running solar power plant which can be useful if we wish to enter the solar power business in future.
One last question: with you newly assuming charge as Executive Chairman, what role would be playing in mentoring Finolex Cables? Tell us more on the new company board structure that has evolved.
As Executive Chairman, my role would be to lead the company from the front. We have already built a capable team to lead most of our projects which are planned. We will continue to build this team further based on a long term vision of new products to be launched in the near future.
At the Board level, we have promoted Mr. Mahesh Viswanthan as Executive Director and CFO. He is very capable person having years of experience of working in multinationals in and outside India. He has already been with Finolex for nearly five years and has learnt the threads of the cable business and is a good asset to the company.