Kirloskar Oil Plans Capacity Expansion

Capacity expansion, entering into alliances for different products, and shifting base of small engines seems to be the roadmap that has been laid out by the Kirloskar Oil Engines Ltd.

Addressing press representatives after the company’s annual general meeting, Mr Atul C. Kirloskar, Chairman and Managing Director, KOEL, revealed that the company has signed a contract with US-based Waukesha engine for exclusive license for the global manufacture, sell and service of 1,500-rpm diesel engines in the range of 3,250 to 4,900 hp for generating sets from 2.4 MW to 3.6 MW.

Mr Kirloskar explained that this would also provide it with natural gas-based engines in the same range. The engines would be packed by KOEL, and packaged generating sets and other aggregates would be sold and serviced by the company.

He revealed that it would also give the opportunity to manufacture and supply components and assemblies to Waukesha for the manufacture of gas engines in the US. The feasibility study for manufacturing was yet to be done, and is estimated to be completed within six months. “We expect to begin manufacturing within 24 months,” stated Mr Kirloskar.

FURSUNGI PLANT

Mr Kirloskar explained that the company was also shifting its Fursungi plant to Rajkot — a move that is expected to be completed by January 15, 2008. He noted that the Rajkot operations would begin by the end of the current fiscal. He said the Fursungi capacity is currently 65,000 engines per annum but would be increased to 80,000 at the Rajkot plant.

Mr Kirloskar explained that the change was a consequence of the lease agreement of ten years drawing to a close, and also because a majority of the vendor base comes out of Rajkot. Commenting on other plans of the company, Mr Kirloskar said that it is increasing its investment in plant and machinery to touch Rs 450 crore as compared to Rs 123 crore for FY07.

He noted that order fulfillment and new product development processes were also being redesigned to improve customer delivery. Sourcing function was being strengthened to meet the increasing demand, and quality supplies and leadership development programmes have been initiated in the company.

EXPORT UNIT

Mr Kirloskar also commented that the company is also setting up an export-oriented unit at Kagal to manufacture 12,000 ePacks each year, and 100 percent capacity utilisation is expected within the next three years. A vendor park was also being set up over 60 acres of land.

The investment in this site is estimated at Rs 550 crore funded by long-term debt of Rs 350 crore, and the rest by accumulated internal accruals. At full capacity, it is expected to employ about 1,000 people. Mr Kirloskar said the company was also looking at products incorporating green technology.

A green technology cell has been set up and he added that it has already launched engines to run on bio-diesels. The emissions from these engines are 20 to 50 per cent lower than engines running on high speed diesel, and they do not emit sulphur.

Commenting on the first quarter results, Mr Kirloskar revealed that sales have increased by 15 per cent to touch Rs 492 crore over the corresponding period figure of Rs 427 crore. Having exited the castings business, the growth in sales has risen by 18 per cent since last year. The profit before tax is Rs 41crore (Rs 34 crore), an increase by 20 per cent.

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