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April 23, 2007

Pricol at the crossroads

Businessworld has an article on how leading Coimbatore-based auto component maker - known best for its speedometer products - is struggling with an uneasy relationship with its Japanese technology partner and in the face of rising competition.
At stake is India’s Rs 1,300-crore auto instruments market, growing annually at almost 14 per cent. Pricol leads for now, but Siemens VDO and smaller players, like Minda Instruments from Pune, are in hot pursuit. Minda, in particular, is a key competitor as it expects to grow from Rs 11.50 crore in turnover in 2003-04 to Rs 90 crore by FY2008.

Although it has a small base (it manufactures only 2 million instruments compared to Pricol’s 16.98 million), it is quickly eating into Pricol’s market share.

To stay dominant, Pricol’s management team needs to act fast. Having bet big on exports, they rely on Denso’s huge network to secure orders from global markets, where Denso enjoys a positive reputation. Simultaneously, they would also like to bring in advanced technologies through other partners. However, it is not clear whether there are any restrictive clauses from the Denso deal that might prevent Pricol from working with other companies. About six months ago, industry grapevine had it that Pricol was in talks with global auto instrumentation majors, which have not yet borne fruit. “No new tie-ups would be possible as long as Denso retains its stake,” says an analyst with Batlivala and Karani Securities in Mumbai.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.