Choosing JV partners, Sanmar Engg. shows the way

By R. Gopalakrishnan

CHENNAI, JUNE 30. The success story of Sanmar Engineering Corporation (SEC), an informal grouping of light engineering and technology-intensive companies in the Sanmar group, lies in its unique approach to foreign partnership.

This is the message that came through in the speeches of leaders of the Chennai-based group and their eminent guests at the launch of SEC's silver jubilee celebrations here today. This view was succinctly put also by the chief guest of the morning, Mr. N. Rangachary, Chairman, Insurance Regulatory and Development Authority (IRDA), who said SEC had ``developed joint venture partnership as a fine art''.

Mr. N. Sankar, Chairman of the Sanmar group, in his address of welcome, said the strategy of the SEC group companies lay in their choice of world leaders in particular product lines - all of these products catering to process industries and petrochemical, pharmaceutical and power plants.

Starting with Durametallic, the 13-business group managed to obtain ten such foreign partners, all but one of them from the U.S., who were also willing to be satisfied with a minority stake and agree to substantial value addition within India, though ``many doors were shut'' to SEC as a result of its parameters.

Over the past 25 years, the group stuck to its philosophy of nourishing joint ventures on the basis of trust, transparency and a clear understanding that there should be mutual benefit from the business relationship without any expectation of ``charity''.

SEC's present manufacturing facilities at Karapakkam, Perungudi and Instronics estate in Chennai and at Viralimalai near Tiruchirapalli had expanded over the years with new companies and products, having a marketing synergy. SEC also relied on the strategy of leaving marketing to a separate company manned entirely by engineers.

With the ``drying up'' of projects in India since the mid-1990s, the group took to targeting exports to their principals themselves, and as a result 35 per cent of its turnover of Rs. 300 crores was accounted for by exports, Mr Sankar said.

Mr. George A. Shedlarski, Vice-President, Flowserve Corporation, U.S., successor to Durametallic, SEC's first foreign partner, said mutual trust, professional approach to business and shared vision, besides availability of adequate working capital, lay behind the success of his company's ties with SEC.

Mr. N. Rangachary, felicitating Mr. N. Sankar and Mr. N. Kumar, Vice-Chairman of the Sanmar group, on their achievement in building the business cluster, said their approach stood in contrast to the previous (pre-1991) business culture in India characterised by cornering of and ``sitting on'' licences to prevent the entry of competitors. Implementing joint ventures, which SEC had developed as an art, required shedding of egos and ironing out differences.

In the present competitive scenario, when excess capacities were being built and customers were demanding, only those who were very efficient would be able to survive, be it in the manufacturing or service sector, the IRDA Chairman observed.

Mr. B. Narayan, Group Senior Executive Vice-President, Reliance Industries, said joint ventures could succeed only if the partners were chosen carefully and both sides ``continued to need each other''. There was a striking similarity between the Reliance group and SEC in their stress on choosing world leaders as partners and in nourishing the partnership on the basis of trust and transparency.

He pointed out that Reliance was now one of the leading customers of Sanmar Engineering, having placed orders worth $90 million with the latter over the past two decades. Emphasising the need for ``continuous review of customer strategy'' on the part of suppliers, Mr Narayan also stressed the importance of transparency in pricing.

Mr. Kumar proposed a vote of thanks.

Representatives of SEC's partners in other joint ventures were present on the occasion.

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