Uno Minda lines up ₹400 crore capex, may increase airbag output

Diversified auto component manufacturer Uno Minda has lined up a capital expenditure (capex) of around ₹400 crore in the next financial year following continued rise in demand from vehicle manufacturers.

At least four new factories are expected to come on stream next year that would serve two-wheeler and four-wheeler companies, a top official of Uno Minda said. In the current year, the group is likely to close FY22 with a capex spend of ₹700 crore, entailed by spends on the new factory.

Sunil Bohra, Group Chief Finance Officer and Group Chief Procurement, said, “For this year, we announced growth capex, which is green field expansion of four new plants. We are putting up a lighting plant for four-wheelers in Gujarat, a new plant for moulding business in Bengaluru, expansion of alloy wheels capacity and expansion of two-wheeler alloy wheel capacity from 4 million wheels to 6 million wheels a year.”

In addition, a capex of ₹300-400 crore for sustaining-cum-brown field growth capex for the current year, thus putting the total capex for the year at ₹600-700 crore.

‘Positive future’

“We are in the upcycle. Even in the peak of the pandemic, we chose not to cut down on capex and not to compromise on long term growth. From that perspective, things appear very positive in the near to medium term,” Bohra added.

In the next financial year, the new under construction facilities of the company are expected to be inaugurated. “The kind of projects we have announced will move towards completion. Broadly, we expect the capex to be in the range of ₹300-400 crore,” Bohra added.

One other area that could need attention will be the airbag segment. The government is contemplating making it mandatory for car makers to install six airbags in every car produced, irrespective of the model and variant. The current norms make it compulsory for automakers to have two airbags as standard. If the government makes six airbags mandatory, airbag producers will have to triple their production as per the current market dynamics.

“Our market share in the airbag segment will be roughly around 15 per cent. The market itself is around ₹1,100-1,200 crore which can go to more than ₹4,000 crore with the new proposal of the government. Our aspiration is to grow the market share to 25 per cent in 4-5 years. We can do almost 1 million car sets every year. To meet this increased demand, we will need to expand our capacities,” Bohra added.