Dynamatic Technologies Ltd., an Indian maker of components for Airbus SAS, Deere & Co. and Ford Motor Co., plans to invest 900 million rupees ($19.3 million) to tap rising demand for defense equipment and automobiles in India.
The company is focusing on aerospace as revenue from the segment surged 10-fold, Chief Executive Officer Udayant Malhoutra said in an interview in his office in Bangalore. Starting June, Dynamatic became the single-source supplier of beams used in European Aeronautic, Defense & Space Co.’s Airbus A-320 single-aisle planes, he said.
“In the future, aerospace components will drive growth,” Malhoutra said. “The surge in revenue will continue.”
Dynamatic is betting on more opportunity at home as India upgrades its military capabilities. The South Asian nation plans to buy 126 combat aircraft valued at $11 billion. As part of an offset clause, the government wants 50 percent of the value of the order to be met through local production and procurement.
Boeing Co., Lockheed Martin Corp., BAE Systems Plc, Saab AB, Dassault Aviation SA and Russia’s United Aircraft Corp. are among the manufacturers vying for the Indian fighter jet order. India has tripled defense spending in a decade as it competes with China’s military expansion. It aims to increase the proportion of defense equipment produced at home from about 30 percent to 70 percent in the next 10 years.
Pumps, Auto Parts
Dynamatic, which has also entered into an agreement to supply Lockheed Martin, will invest 700 million rupees on a factory to make aerospace components and spend 200 million rupees to modernize its automobile parts plants this fiscal year, Malhoutra said. The company has an accord with Wichita, Kansas- based Spirit AeroSystems Holdings Inc. to supply the flap-track beams to Airbus.
The company’s revenue increased 6.9 percent to 4.4 billion rupees for the year ending March 2010, of which aerospace accounted for 781 million rupees. Shares barely changed this year and traded at 950 rupees apiece on the Bombay Stock Exchange as of 10:45 a.m. local time.
A booming car market in the world’s second-most populous country will also help boost sales at Dynamatic, Malhoutra said.
Automobile sales in India, Asia’s fastest growing major economy after China, rose 38 percent to 158,764 vehicles from a year earlier in July, according to the Society of Indian Automobile Manufacturers. It was the highest monthly total the body has recorded, according to a statement on Aug. 9.
“The question is how much we will be able to benefit” from the growth, he said.
Dynamatic controls 75 percent of India’s hydraulic gear pump market, according to him. The pumps are used in tractors and construction equipment made by companies including Mahindra & Mahindra Ltd. and Ashok Leyland Ltd., and they contributed 1.9 billion rupees to total revenue.
“This year we expect more growth in profits than revenue as we have stopped producing components with low margins,” Malhoutra said. “The product mix has improved and during the last two years when the times were challenging we retooled the company,” he said.