Coimbatore Engineering SMEs Taking the Diversification Route

After facing the double whammy of weak overseas sales and drop in volumes on the domestic front for the last 8-9 months, small and mid-sized engineering firms in Coimbatore are foraying into alternative segments and diversifying their product base to sustain operations

Engineering units, which were previously engaged in machine tools sector, are gradually shifting gears and taking up crucial assignments in other sectors like agricultural farm tool equipment industry and mechanised irrigation equipment market.

Entering into new segments is expected to boost the flagging sales volumes for the SME engineering sector and help them gain a greater market share through their diversified product portfolio.

Branching out

The repercussions of the global economic deceleration have prompted many units to diversify into various segments to revive their plunging bottomlines. The most preferred route that small and mid-sized units are opting for is the pivot irrigation equipment market.

“Engineering firms in Coimbatore see immense scope and huge business potential in the pivot irrigation equipment manufacturing sector. Hence, most small units are branching out to manufacture components for pivot irrigation. Moreover, as many engineering companies are already involved in the production of agri-related products, they could seamlessly move into production of components used for the pivot irrigation market,” said K Ilango, President of the Coimbatore District Small Industries Association (CODISSIA).

Prospects of higher revenue growth from the mechanised irrigation equipment sector are prompting several units to shift a part of their production facilities for manufacturing component for the crop irrigation market.

“Margins in the machine tools industry have shrunk drastically over the past few months. Comparatively, revenues are better in the crop irrigation and agricultural farm tool sector since the demand continues to be steady for agricultural engineering equipments. Given the market dynamics, SME engineering units are considering it wise to utilise their capacities for manufacturing machinery for the agriculture sector,” said A Kapoor, Director, Dtool Connexion, a leading exporter of Machine Tool Products based in New Delhi.

The machine tools industry saw a 25% drop in its output in 2008-09 and witnessed huge losses following slump in overseas markets.

Besides helping SMEs to revive their business volumes, the diversification of SMEs into mechanised irrigation equipment market is also expected to bolster the agriculture sector.

The trend to shift to new engineering segments is likely to encourage joint ventures and collaborations as small engineering firms look to acquire greater expertise before foraying into new markets.

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