India’s manufacturing sector needs to own a lot more intellectual property (IP) not just to ensure robust sustained growth but also to ensure a competitive edge, according to Gauri Kirloskar, managing director, Kirloskar Oil Engines (KOEL), which clocked revenues of ₹4,073 crore in FY23. Gauri is the fifth-generation Kirloskar to join the business. She is the daughter of KOEL executive chairman Atul Kirloskar.
“If we look at India’s growth story that everyone is talking about, the growth story itself has led to an increased manufacturing output. But to be truly globally competitive we have to build our intellectual capital,” Gauri said at the India Science Fest in Pune. Currently, the manufacturing sector accounts for 17% of the GDP and employs over 27.3 million workers. The government is now looking at increasing the share of the output to 25% by 2025.
Incidentally, manufacturing exports hit a new high in FY23 at $447.46 billion, clocking 6.03% growth over the previous year’s $422 billion. KOEL, a leading manufacturer of diesel engines, farm equipment and generator sets, generated 12% of its turnover from international markets in FY23.
“When we manufacture engines, there is the option of tying up with a global company and getting a technology transfer and manufacturing the engine locally. Or you can design and develop it yourself, own the intellectual property and then manufacture in India. This is obviously the preferred option,” says Gauri.
The company has three main business segments: B2B, B2C and Financial Services. While the B2B businesses focus on internal combustion engines and related businesses, the B2C businesses focus on water management solutions and agri-related businesses and the financial services segment comprises of Arka Group.
With the market transitioning from petrol and diesel pumps to electric pumps, KOEL ventured into electric pumps through a minority stake in the Ahmedabad-based La-Gajjar Machineries (LGM) in 2014 and, last year, it made additional investments in LGM, making it a 100% subsidiary. The acquisition will help KOEL consolidate its footprint in the diesel and electric pump market through LGM’s Varuna and Raindrop brand of submersible and mono-block pumps.
KOEL is further investing capital towards developing an internal combustion engines portfolio to be emission compliant, not just for the Indian market but also for overseas customers. The engine platforms being developed will be fuel-agnostic, that is, they can run on diesel, natural gas and less complex carbon chain fuels such as ethanol, methanol & hythane. The company, which has a market cap of over ₹10,000 crore, last year spent ₹84.64 crore on research and development, accounting for 2.1% of sales. Chairman Atul Kirloskar too mentioned the need to encourage research and development in India.
Interestingly, as per the last All India Survey on Higher Education survey, enrolment to engineering programmes had hit a five-year low, from 40.85 lakhs in FY17 to 36.63 lakh in FY21. “To build our intellectual capital we need more engineers, and for that more students need to choose science,” said Gauri, whose company has 24 employees spearheading its R&D efforts. However, given that, of late, private engineering institutes have seen a 50%-70% drop in campus placements, amid a slowdown in IT services and a sluggish manufacturing sector, the lure of science and engineering is fast fading. What is also not helping is that India’s gross expenditure on R&D, as a percentage of GDP, has stayed flat at 0.7% for about a decade even as recent estimates show that India Inc’s aggregate R&D spend has fallen 9% in FY23.