CUMI with approximately 35% market share along with Grindwell Norton (Indian subsidiary of Saint Gobain) commands over 70% of the Indian abrasive market. Abrasive segment for CUMI includes Indian operations, JV with Wendt, Sterling subsidiary, Chinese capacity of 3000 MT, Middle east, Canada and South Africa Operations.

Bonded Abrasives was found to be a star for CUMI-Murugappa and Coated abrasives had relatively less market share and less market growth in comparison to Bonded Abrasives. Similarly, Raw super abrasives had relatively low market share than the other two but with a high market growth. Loose abrasive grains, being the latest product for the company, had moderate market growth with low market share.

What makes Carborundum Universal (CUMI) a mini General Electric in the makingAshutosh Shyam, ET BureauSep 16, 2014, 08.00AM IST

Tags: Wendt India| Saint Gobain| Pusa Institute| M&A| Grindwell Norton| General Electric| ET 500| economy| CUMI Australia| Cumi| Carborundum Universal| Carborundum| CAGR (A focussed acquisition)Carborundum Universal (CUMI), part of the Chennai-based Murugappa Group, may well be described as a mini General Electric as it produces a gamut of products used as raw materials for different applications. The firm produces raw materials used in simple products like a face scrub or kitchen scrubber to paints, clothes, coal washeries and rice polishing. Besides, it makes raw materials for the catalytic converter for automakers and also supplies silica carbide to nuclear power plants.

While catering to such a diverse customer base, the company has also maintained a balance in organic and inorganic growth over the past five decades. "We have planned our long-term growth in such a way that twothirds of our growth will be led by the inorganic route and the rest will be driven by the organic route," said K Srinivasan, managing director of CUMI. "All our acquisitions are pursued according to a set policy followed by the company's management. If the prospective company fulfils our criterion, we plan our acquisition strategy," he added.The company has clocked an annualised growth of 22% over the past eight years, reporting a revenue of Rs 2,039 crore in 2013-14 compared to Rs 539 crore in 2005-06. This happened largely due to the acquisitions made by the company over the past 15 years. During this period, the company bought about 40% stake in Wendt India, 51% in CUMI Australia, 51% in Forkor Zirconia (FZ) of South Africa and 86% in Volzhsky Abrasive Work (VAW) of Russia.CUMI follows a rigorous approach to acquisition and does most of its due diligence internally, obviating the need for merchant bankers. CUMI's confidence can be gauged from the fact that it is the first Indian company to have made a hostile takeover, of Wendt India in 1991In the past two years, however, some of its acquisition bets have gone awry and the company has, therefore, been taking several difficult and tough measures to get back in shape."In the current financial year, all our overseas acquisitions will start to grow considerably healthy from the third and fourth quarter onwards, except for RHI and Thukela. We are considering restructuring some of these loss-making entities based overseas," said Srinivasan. "Post the restructuring of these overseas entities we would be comfortable to grow at a long-term CAGR of more than 20%. We are quite positive on the significantly ramped-up volumes of VAW and FZ. It is just a matter of time as to when they start adding to our top line. Once the volume picks up, it would certainly start helping improve our margins," he added.In the past two fiscals, the company's operating profit margin dropped to 13% of net sales, compared with 19-20% between 2009-10 and 2011-12. The slackness in the domestic economy took a toll on the company's capacity utilisation and led to losses at its overseas units.The company now sees green shoots, both in the domestic and overseas markets, as its overseas units such as FZ are turning profitable again and the order inflow is picking up in India as well. Its Russian subsidiary VAW is annually producing 80,000 tonnes of silica carbide (SIC), which is used as an abrasive. It can produce an additional 100,000 tonnes. A technical hitch that it had faced while ramping up production at one of its bubble plants at FZ is also expected to be resolved soon.In the near term, the company is confident about revival in its domestic business on expected recovery in demand from the ongoing quarter. "We have now started seeing an order inflow. Though the orders have not become sales in the first quarter as much, there is a clear order inflow from the automotive and auto-component sectors. This will result in an improvement of our margins from the second quarter of 2014-15," said Srinivasan.The company's margins have already turned for the better, but a further improvement is expected from the next quarter, he said, adding that the order inflow was very good in June and July amid growing auto sales.Domestic sales account for as much as 75% of the consolidated revenues for the company. CUMI plans to drive its domestic sales by a combination of new and innovative products. It is striving for 15-18% of its sales from new products, benchmarking itself against global rivals such as 3M that derives nearly 25% of their sales from new products every year.In the domestic market, the company is clocking Rs 150 crore in sales of new products every year, primarily due to the verticals such as power tools, consumer business, thin wheel and super abrasive segment. It commands a share of about 25% in the domestic abrasive market, where it is ranked second after the multinational company Grindwell Norton."Our products were able to successfully make inroads in the domestic market because we have made our products keeping in mind that they are needed for 'rough usage'. We build our products for 'misuse' rather than for 'use'. This helped us in building our business, compelling most of our customers to come back to us as our products have tremendous longevity even after being mishandled," said Srinivasan.Despite being a minnow in comparison with global firms such as 3M and Saint Gobain in terms of research and development, the company is continuously increasing spending on innovation. So far, it has produced two products that have the potential for commercial success. One is hydrogel, produced at the Pusa Institute, which absorbs water nearly 500 times than the normal soil and increases the yield by as much as 30%. The hydrogel technique has been introduced by the company in five states. The second product the company is working on is the bioceramic strip that will help heal wounds.