The international arm of Kirloskar Brothers Ltd. is planning to streamline operations of the business and aims to be debt-free soon, Alok Kirloskar, director at Kirloskar Brothers Ltd. (KBL) and MD, SPP Pumps Ltd., U.K., said in an interview. Edited excerpts:
How big is the international business and what is the focus?
The international business accounts for a little over 40-45% of KBL’s revenues. Our objective is not sales, but cash flow and profit. In these difficult times, we had focused on realigning the business. We plan to shrink the business and release the cash and enhance profitability. The focus is on improving the balance sheet. We have been doing that at KBL for the last 10 years. In March, at the net debt level, we [KBL] are almost debt-free and the next two quarters have shown similar improvements in our balance sheet position. The same focus is on the international side. We are focussing on bettering the balance sheet. We feel that stronger balance sheets in difficult times are more important. The international business had revenues of about ₹1,400 crore as on March 31, 2020. We are looking at pushing towards a debt-free position. We won’t get that this year, but we will make a huge improvement over last year from a balance sheet point of view. So, our focus is more on balance sheets than boosting revenues.
The debt on the overseas side at the end of March 2020 was a little over ₹190 crore. We’re targeting to see if we can bring it down, this year, to a little over half that position, that is our target.
What is the change in strategy?
Going forward, our strategy is changing a mix of businesses, and adding a lot more services onto the businesses. That is our first and foremost focus, an overarching strategy across all our businesses. Whether we are in the U.S., the U.K., the Netherlands, South Africa, or Thailand, our first focus is that. Our objective is to get 50% of the business to be service-oriented from 20% currently and 50% product-oriented.
What is the way forward…
Now, the objective is also subscription sales. We see slowly a lot of people are moving from product and services to subscription. That’s how we see the progression. Because of that we have been investing in a lot of technologies to see how we can support our customers. We want more active ways of engaging.
In India, we have already released a product called Kirlosmart, which is a product that does product diagnostics. We have a similar product in the U.K. called FireEye. We introduced it in the fire segment because that is where we are strong.
SPP U.K. is very strong in the fire segment. Any high rise building in the world that you can think of has an SPP fire pump. Whether it is the Burj Khalifa Tower or New World Trade Centre, The Shard in London or the Marina Bay Sands in Singapore, all of them have SPP fire pumps.
KBL used the same technology in the Atal Tunnel recently. We have introduced FireEye, it is a similar product, its service, and diagnostics, which moves us slowly to subscription services.
Like I said earlier, it is not just the car industry that is going to face these changes, everybody is going to face these changes. The sooner we are prepared, the better we will be.
What is the synergy between the Indian and international businesses?
There is a huge synergy. A lot of the technologies that we develop in our centres in the U.K., the U.S., and the Netherlands are used in India. Quite often, we develop products jointly between India and the U.K., the Netherlands. We have a huge team across these areas.
I would say we are able to introduce a lot of new technologies in India because we first introduce them overseas and then in India. We have installed the first fish-friendly pumps in the Netherlands. It is very useful when you are pumping water from the rivers, a whole fish can go through. In fact, we have worked with the Dutch government for NEN Standards for fish-friendly pumps, which basically means that we have to pass 100 eels through a pump and these eels have to survive three days later and the survival rate has to be 97 out of 100 eels. The change in pressure in a pump is often responsible for the death of eels. The pumps are designed in a way so that there is not much pressure change. We have introduced this for new projects in India.
Auto prime systems is another product which we developed overseas, in the U.K., and is used for storm water control in India. For example, you must be aware of our Thailand story when footballers were rescued from the Thailand caves. A lot of these special patented products are introduced by us in India with a proven track record. There is a lot of synergies, where we build, install products and then introduce them in India after that.
How has the international business helped Kirloskar Brothers?
In Egypt, pumps are called Kirloskar. We are building a sustainable base. This is because owning well-known brands helps. Through our well-known brands — SPP or SyncroFlo — people are exposed to Kirloskar. One big learning is also about how to work with people. The new generation in India is very Western; it is different from the earlier generations. As a company, we learned how to deal with these people, because of our operations overseas.