Azad Engineering intends to continue to expand its customer base by leveraging its relationship with the existing customers in India and globally
FinTech BizNews Service
Mumbai, December 22, 2023: The fact that Azad Engineering’s IPO has been subscribed more than 11 times on day 2 itself on Thursday, is no big surprise to those who know the strategies the company has on wide range of customer-centric aspects and product innovations, as mentioned in its RHP. The Issue is to close on Friday, December 22, 2023.
The top management has, in its foresightedness, devised a number of strategies to lead the company to newer heights in future:
Expanding Customer Base
Azad Engineering leverages its industry-leading capabilities by continuing to diversify its customer base and increase penetration and wallet share with existing customers by entering into new component lines. Azad Engineering intends to continue to expand its customer base by leveraging its relationship with its existing customers in India and globally, while simultaneously pursuing opportunities to develop new relationships. The company aims to continue to maintain its strong track-record of repeat orders from its existing customers as well as expand and strengthen its relationships as part of its organic growth efforts.
Increasing & Improving Product Bouquet
Azad Engineering intends to focus on leveraging its relationships with its customers to improve its existing products and also increase the number of products that it currently manufactures for each customer. The company is in the process for qualifying for parts and components for the combustor section of a land-based turbine which include liners and frames, inner casings, fuel spray nozzle, flame tubes and transition piece. By leveraging from its experience of manufacturing components for land-based turbine engines, the company also intends to manufacture other parts and components for a turbine engine to be used in an aircraft. The company is continuing to explore several more opportunities on new engine and aircraft programs that are under consideration or have been recently announced. The management believes that this will result in adding new customers and in an increase in the wallet share of each customer, and company’s revenues, margins, and profitability.
Manufacturing Ecosystem
Further, in the manufacturing ecosystem for the industries it serves, Azad Engineering manufactures highly complex parts, which allows it to easily manufacture items which are less complex in nature and at scale, ensuring longevity of relationships with its customers. The company will capitalize on the current set of customers consolidating their supplier bases to capture greater total value content in individual programs. In order to achieve this, the company intends to actively manage its key customer accounts to increase customer interaction, collaborate with its customers in the early stages of product development and help them optimize their supply chains by managing their lower tier suppliers. It intends to continue to develop its backward integration capabilities to provide its customers with more options for materials and will also continue to focus on becoming a comprehensive engineering solutions provider for its customers.
Azad Engineering intends to augment our manufacturing capabilities, including by way of inorganic acquisitions, to better serve its customers and to build scale, while delivering state of the art execution.
The company has proposed to fund its capital expenditure requirements through the Net Proceeds towards the purchase of plant and machinery for its existing manufacturing facilities. Further, it has two manufacturing facilities in the pipeline at (a) Tuniki Bollaram village in Siddipet district, Telangana and (b) Mangampet village, Sangareddy district, Telangana, with a total manufacturing area of 94,898.78 square metres and 74,866.84 square metres, respectively. The construction and development of these proposed manufacturing facilities are intended to be funded from its internal accruals.
The upcoming manufacturing facility of the company at Tuniki Bollaram village in Siddipet district, Telangana is proposed to have dedicated and exclusive manufacturing setups for its customers. The company plans to initially introduce this exclusive manufacturing setup for production of critical and complex components such as airfoils/ blades and other special machined parts for gas and thermal turbines for Mitsubishi Heavy Industries, Ltd., one of our long-standing customers. This facility will be a part of its upcoming ‘Centre for Excellence and Innovation Centre’.
Focus On Exports
Exports have been the main stay of Azad Engineering’s growth. The company intends to continue to focus on sales in international markets. Export sales provide us with higher margins on its products. It intends to grow its sales within the existing geographies where its customers are present.
Benefits To Accrue
Azad Engineering intends to set up more of such dedicated and exclusive manufacturing setups, where certain manufacturing lines in its manufacturing setups in its manufacturing facilities will be dedicated to manufacture of components for specific customers. It is these customers, who the management believes, will be benefitting from its focused highly engineered, complex and mission and life-critical high precision components manufacturing process. The company also intends to augment its facilities by undertaking inorganic acquisitions to enhance its manufacturing facilities and provide value-added services incidental to its business. The management believes that the expertise gained by it due to its unconventional approach of manufacturing products will enable it to manufacture lesser complex products which are high in volume and low in cost with the same quality standards as applicable to its current products. The management believes this will enable the company to diversify its product categories, cross sell its products to its existing customers, add new customers and manufacture lesser complex products at scale which will result in increased revenues, wallet share of its customers and profitability.
Strengthening core capabilities
Azad Engineering intends to continue to strengthen its capabilities and expand its existing relationships with its current customers and by acquiring more strategic customers across its focus industries. The company feels high domestic volumes and consumption, and higher outsourcing volumes will influence domestic manufacturers for OEMs to bring in the component ecosystem locally and enhance local capabilities of component sourcing, thus making the ecosystem stronger and closer.
Well Positioned To Build Scale
The Defence Acquisition Procedure 2020 is aimed to increase ‘self-reliance’ by boosting domestic production and indigenization, promoting import substitution, cutting-down the gestation period and hastening up of defence procurement (Source: EY Report). Further, global tailwinds in the renewable energy industry have given a push for the turbine market and India with its engineering capabilities, large skill pool and low-cost operations and investor-friendly environment is placed well to attract global investments (Source: EY Report). The management believes that the company is well positioned to further augment its core capabilities and build scale by taking advantage of potential moves from global players looking to localise and leverage cost advantages by setting up manufacturing facilities in India under various government schemes, as well as of the growing complexity in product design and development such as miniaturisation of products.
Investment In Automation, Modern Technology
Azad Engineering will continue to invest in innovation, automation, modern technology, and equipment to continually improve its products and capitalize on changing customer preferences. The management believes that the company’s innovation, research and development capabilities and fast supply chain lead-time are key factors that distinguishs it from its competitors both in India and globally. The company undertook automation of its manufacturing processes by implementing manufacturing execution systems to increase the overall production efficiency and shorten the time to produce with enhanced quality along with reducing downtime and idle time. The company intends to continue enhancing its operational efficiencies, and exploit economies of scale, by better absorbing its fixed costs, while also reducing other operating costs to strengthen its competitive position.
Consistent with past practice, the company intends to continue using a variety of other manufacturing and cost reduction strategies including process engineering and automation to improve its operational efficiencies, capacity utilization and ensure lean manufacturing. The company has positioned itself as a technology-driven, self-featured innovative company within the turbine, aerospace and precision parts manufacturing industries. The company will strive to increase the level of automation of its manufacturing facilities to cope with growing labour costs.
