Craftsman Automation: Cheap and Efficient Engineering; This diversified light engineering company has grown by adopting new ideas without worrying about following the herd

Craftsman Automation: Cheap and Efficient Engineering

by Ashish K Mishra | Sep 3, 2013

This diversified light engineering company has grown by adopting new ideas without worrying about following the herd

topimg_22389_s_ravi_600x400 Craftsman-FINAL.indd

“So, how’s business?” Ask any businessman this question and, often, you know what response to expect. “Good, very good, excellent, thank you.” But S Ravi, chairman and managing director of Craftsman Automation, said, “Not good.” He explained why: “The commercial vehicles market is looking tough and we don’t know how long it will continue like this. But tractors have done well for us. And we are in a much better position than we were at the time of the Lehman crisis.” That’s Ravi for you: Positive and realistic at the same time. His company is no different. Craftsman Automation, a diversified light engineering company was started by Ravi. Its central idea was to make things for others in a cheaper, more efficient way. Headquartered in Coimbatore, with 10 plants across India, Craftsman’s business is split almost 50:50 between automotive and non-automotive products. In the automotive vertical, it manufactures engine heads, blocks and transmission parts, including gear boxes for commercial vehicles, tractors, construction machinery and utility vehicles. Key customers are Daimler India Commercial Vehicles, Tata Motors, Ashok Leyland, Mahindra & Mahindra and JCB.
In the non-automotive vertical, Craftsman makes wire rope cranes, electric chain hoists, marine accessories, sheet metal products, and aluminium foundry; it also does contract manufacturing for industries like printing, textiles and windmills.
While Craftsman started out as an export-focussed company, today, domestic versus export revenues are split 75:25. In 2010, International Finance Corporation invested about Rs 162 crore, followed by Standard Chartered PE with around Rs 85 crore in 2012. Both picked up minority stakes.
The man behind it 
At the age of 21, in 1984, S Ravi, a final year student of mechanical engineering had time to kill. That is when the idea of Craftsman Automation, a partnership between him and his college seniors, was born. “I had the opportunity to study further or look for a job outside because job opportunities were very limited here. The other option was to stay in Coimbatore and start out on my own. I chose the latter,” says Ravi.
Craftsman started as a vendor to manufacturing units in Coimbatore. “Then we started sourcing material, doing sub-assembly, making customer -based products, redesigning products and, finally, producing the products. We increased our manufacturing activity from machining to foundry and sheet metal,” adds Ravi. By 1990, he realised that growth opportunities were getting limited so he reached out to larger companies for alliances.
Over the next few years, he set up several businesses—manufacturing auto components, plastic parts, pressure dye casting, a textile unit. While this helped Craftsman grow, it also became too large and diversified to manage. “Around 10 years ago, I decided to quit everything and concentrate solely on Craftsman Automation. One by one, I have given all the other companies to my colleagues,” says Ravi.

Why It Is A Gem 
There are three reasons which make Craftsman a hidden gem. First is the entrepreneur himself. “I look at companies from a 4M perspective: Management, market, merchandise and model. Management is the most important. With Ravi, we found an entrepreneur who was focussed and had a very good understanding of the dynamics of the trade, both in India and abroad,” says Namit Arora, director, Standard Chartered PE.
Second is enterprise. “This is the fundamental theme of Craftsman: That we are not stuck to any sector, or constrained by saying that only this is our core competency,” says Ravi. Take, for instance, its entry in the auto business: In 2004, it had one automotive and one tractor customer; 2 percent of sales came from this sector, with exports accounting for 82 percent. “We grew fast in the auto business. From a turnover of Rs 2 crore in 2004 to around Rs 300 crore last year,” Ravi says.
The third factor is focus. Ravi believes that machining is a generic skill, whether it is for automotives, aerospace or a gearbox. “We would like to stay a learning company and keep our minds young. Otherwise, we will be following the herd, which is going only in one direction.”
There are not many examples of home-grown engineering companies in India that have made it big. But with a turnover of about Rs 600 crore, Craftsman seems poised for growth. Ravi says he wants to expand to about Rs 1,000 crore in the next three years. That is when he will be looking at a listing.
Arora seems to agree: “The bar for IPOs, in India, has become significantly higher. If you are sub-scale, there will be no investor appetite. So Ravi is building scale without limiting himself to any single sector, company or country.”
Why it was hidden
Craftsman has been under the radar for two reasons. One is location. Coimbatore is better known for textiles than engineering. While it has spread its wings outside the city, Craftsman is headquartered there. The second is brand. Engineering is not a business where companies have built brands. Almost everything Craftsman does is not sexy.
Risks and challenges
Craftsman has to grapple with the long slowdown in the automotive sector. The medium and heavy commercial vehicle business has been severely hit. But the tractor business has surprisingly seen growth of almost 11 percent, compared to the expected 5 percent. Craftsman’s exposure to the commercial vehicle business is about 13 percent compared to 20 percent in the tractor business. But the challenges, Ravi believes, are more organisational in nature: Keeping efficiency and productivity at a high level and constantly improving quality standards.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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