The arrival of the automobile and information technology giants in Pune has given the city a 'hub' branding that will drive its growth at a faster rate, reports Huned Contractor

With global recession now having faded to being nothing more than a bitter memory, the one city that has bounced back with a firmer resolve than ever for brisk growth is Pune. And since it was information technology that was considered a barometer of the downslide during the recessionary period, the assertion of everything being back to a healthy level can be gleaned from the fact that the IT industry in Pune is expected to touch the Rs 30,000 crore mark in exports in 2010-11, with Maharashtra estimated to cross the Rs 50,000 crore benchmark. This will mark a 10 per cent rise over 2009-10, when Pune's IT exports amounted to Rs 28,000 crore and Maharashtra's about Rs 48,000 crore. On a comparative scale, in 2009-10, Karnataka had clocked Rs 76,000 crore during 2009-10, of which Bangalore accounted for more than 80 per cent.

According to Chetan Shah, President, Software Export Association of Pune (SEAP), "IT exports from Pune will constitute a major chunk of the Rs 50,000 crore IT exports from Maharashtra." Further, a study conducted by NASSCOM estimates that Pune provides cost advantage of 12 per cent compared to other cities in the country and as such the IT industry here is set to witness a steady rise of 15-20 per cent in exports per year.

Admitting that this figure is "realistic" enough, Mritunjay Singh, President, Hinjewadi Industries Association, says, "Post recession, many global players are setting up base in India and Pune is a natural choice. Pune being an open city that welcomes emigrants and it being an educational hub and a good talent pool gives the city an edge over the others." And as former NASSCOM chairman and CEO of Zensar Technologies, Ganesh Natarajan, puts it, "Pune could cross the Rs 50,000 crore IT export mark if it continues the dream run."

Meanwhile, even as the aspirational value of Pune turning into a major IT hub takes wings, the one thing that cannot be missed out is that it has already established itself as an auto hub. The flag-off can be credited to the entry of Tata Motors and Bajaj Auto in the 1960s that gradually built up to the arrival of the first foreign automobile original equipment manufacturer (OEM) Mercedes-Benz in the 1990s through a joint venture with the Tatas, and later on its own. Today, Pune can boast of the presence of the biggest auto MNCs such as General Motors, Fiat, and Volkswagen even as the domestic giants such as Mahindra & Mahindra (M&M) have willingly committed large investments in this region.

According to Dr Abhay Firodia, President, Mahratta Chamber of Commerce Industries and Agriculture (MCCIA) and Chairman, Force Motors Ltd, "The period between 2006 and 2008 was the best of its kind for Pune when around Rs 12,000 crore was spent on projects in the region. And now we may see an inflow of around Rs 40,000 crore for the period between 2008 and 2013."

Some of the recent auto projects include the Fiat-Tata joint venture at Ranjangaon with a proposed investment of Rs 4,000 crore, GM's Rs 1,400 crore investment with a further Rs 900 crore expansion, Volkswagen's project of Rs 3,800 crore, Mercedes' Rs 250 crore investment with further expansion plans, and Mahindra & Mahindra planning a huge Rs 5,000 crore investment by 2012. Moreover, Bajaj Auto has on the cards Rs 300 crore investments in two-three wheelers. Given this spurt in the arrival of the auto OEMs, Pune's auto component industry is swinging high too. There are more than 4,500 SMEs operating in the automotive and engineering verticals in and around Pune city whose capacity utilisation has risen significantly in 2010 to more than 70 per cent. The increasing demand has also provided a boost to the small-scale units engaged in vehicle engineering, prototypes, automation, robotics, and material handling services. This has, but naturally, attracted foreign companies too.

For example, a large multinational auto component supplier like the ZF Group of Germany has made a commitment of around Rs 50 crore, Prembo of Italy is setting up a Rs 100 crore disc brakes facility, and Norma of Germany plans to invest about Rs 18 crore to manufacture plastic tubing systems and clamps.

Elaborating on General Motors' choice of Pune as the location of its second plant in India, P Balendran, Director and Vice-President, Corporate Affairs, says, "Pune has a large supplier base. When we start exporting, the Nhava Sheva port is just two hours' drive away. Also, the western region is our second-largest market after the north, and logistically, this plant can cater to both southern and northern markets." General Motors, which already has a plant at Halol, has an investment outlay of Rs 1,400 crore at Talegaon, and will look at global sourcing from India. Yet another entrant in recent times has been the ElringKlinger Group, a leading German development partner to the automobile industry and original equipment supplier of cylinder-head and specialty gaskets.

The company has set up its first manufacturing facility in India located at Ranjangaon. With its presence in 21 locations across the globe and a turnover of Euro 607.8 million, the group has strengthened its position as a direct supplier to customers in India. The plant, set up at an investment of Euro 5 million euros, will have a capacity to produce several millions of gaskets for power-train applications such as engines and transmissions.

Meanwhile, in one of the most recent developments, global automotive supplier Brose inaugurated a manufacturing plant in Pune on February 3, 2011 at Hinjewadi. The plant will cater to the Indian automotive market and export to Europe and Asia. The 2,300 sq.m facility is to produce window regulators in the first year and has a capacity for two million units. By September this year, the plant will also be producing manual seat height adjusters and in the medium term the plan is to manufacture and supply the entire product portfolio locally. "With the Pune plant we now have a local production footprint covering the entire value chain in Pune - from development, component procurement to final assembly and logistics," says Ashwani Aggarwal, President, Brose India.

What has also helped is the presence of the Automotive Research Association of India (ARAI) in Pune which is India's premier automotive R&D, testing, and certification organisation. It has now tied up with TUV Rheinland, a 130-year-old German multinational and one of the world's largest testing, inspection, and certification agencies, to offer testing and homologation solutions to the Indian and international automotive industry.

With this association, the Indian manufacturers will have an edge in exports of vehicles and vehicle parts as all the aspects of testing and certification as per international standards like EEC/ECE will be handled locally by qualified experts. And even as the MNCs are zeroing in on Pune, there are local companies, which are now actively entering into collaborations to give the city a true global positioning.

For instance, Pune-based Electro-Mech, industrial crane manufacturer and customised material handling solutions provider, has entered into an agreement with the US-based manufacturer Shuttlelift to extend its offerings to the construction and material handling industry. "The Indian material handling equipment (MHE) industry is maturing fast and specialist lifting concepts are catching up. Our customers have been asking for more dynamic and cost-effective hoisting solutions that demand technical innovations and this is obviously a big step in that direction," reasons Tushar Mehendale, Managing Director, ElectroMech. This is Shuttlelift's first foray into India and the partnership will tap the burgeoning infrastructure and construction sector.

Another instance is of a joint venture between the Germany-based Blumenbecker group of companies that focuses on automation technology, industrial services, and the sale of industrial products and Pune's Kat Automation, following which the company has been renamed Blumenbecker Kat Automation Private Limited. Announcing this at a media conference, Dr Wolfgang Fink, Managing Director, Blumenbecker Group, said, "The move is aimed at developing local business with customers in India and providing European customers doing business in India with pre and post-sales support. The new company is further evidence of Blumenbecker's ambition to gain a bigger foothold in the Asian market, where it joins the four companies that the group already has in China."

And now with the government's emphasis on infrastructure development, Pune is also witnessing the growth of allied sectors, one such example being that of Ravin Cables that has entered into a joint venture with the Prysmian Group of Italy to have access to world-class technologies and best global manufacturing practices.

"We will shortly be setting up CCV lines at Pune to manufacture EHV cables up to 220 kV. Power Plus Cable Company LLC, which is a joint venture between Ravin Cables Ltd and the Government of Fujairah in UAE, currently has the capability to manufacture cables up to 220 kV. In both the plants we are also aiming to introduce specialty oil and natural gas cables as well as other specialised sector specific cables. We shall also be leveraging on Prysmian's worldwide facilities to supply submarine cables, optical fibres, EHV joints & terminations and specialised sector specific cables into the Indian market," informs Vijay Karia, CMD, Ravin Cables.

Providing a reason for why Pune has emerged as the 'chosen one', Mukesh Malhotra, former president of the MCCIA, says that it can also be attributed to the presence of other companies such as Bharat Forge, which is among the top forging companies in the world and Sandvik's large cutting tools facility, not to forget other big industrial establishments such as Thermax, Kirloskar Oil Engines, Mather & Platt, Praj Industries, Sulzer India, and so on. The easy availability of skilled manpower is another factor. "There must be more than a lakh engineers working in and around Pune in clusters developed by the Maharashtra Industrial Development Corporation (MIDC) at Pimpri-Chinchwad, Chakan, Ranjangaon, and Talegaon.

This manpower is being absorbed from the 1,000 technical and engineering institutions in this region," Malhotra states.

Agrees Farook Merchant, CEO, Messung Systems, who attributes Pune's industrial growth to a successful amalgamation of several factors that includes political will, the role played by the MIDC, the city's proximity to the trading hub of Mumbai, the easy availability of talent, and the comparative ease of finding accommodation for those who come here from other cities. "Pune has always been an engineering city and therefore the progression to becoming an auto or IT hub has come about naturally," he adds.

That Pune is gaining strength from the arrival of MNCs is also evident from associated developments. Consider, for example, the fact that Tata Motors and the Government of Maharashtra have signed a Memorandum of Understanding (MoU) to facilitate the proposed expansion of manufacturing plants and setting up of vehicle testing facilities here.

Tata Motors will invest about Rs 6,000 crore over a four to five year period in its existing plants and for the setting up vehicle testing facilities. Further, IBM has set up a new Global Delivery Centre in Pune to provide auto majors, among other industries, business consulting and application services. According to Rajesh Nambiar, Vice President and General Manager, Global Delivery, IBM India, "The vast presence of OEMs and automotive industry expertise in Pune will help the new centre serve as a strategic location for IBM's global and local automotive clients."

Pune, in fact, has been on a fascinating growth trajectory with industrial investments worth Rs 4,500 crore having poured into the district every year for the last two years. The city's manufacturing sector is poised to record an annual turnover of Rs 60,000 crore by 2010 from the current Rs 52,000 crore. According to data available with the MCCIA, the manufacturing firms in Pune have a turnover of nearly Rs 52,000 crore annually and the top 12 companies (with a turnover of more than Rs 1,000 crore) contribute to more than 50 per cent of the total industrial turnover. There are about 12,500 formal sector manufacturing-driven industrial units in Pune. Of these, 9,500 have a turnover of at least Rs 5 lakh per annum.

Fresh investments seem to pour in regularly. Among the most recent such announcements is that of food processing and packaging company Tetra Pak that has decided to establish a new processing and packaging plant at Chakan in Pune with a total investment of Rs 600 crore to meet the continuously increasing market demands in India and abroad. The factory will start operations latest by December 2012.

"With a capacity of 8.5 billion packages per year, we are gearing up to meet the growing demands of consumers. Besides supporting the expected strong growth in the Indian market, the plant will also support the company's growth in other key geographies such as SouthEast Asia and the Middle East," informs Kandarp Singh, Managing Director (South Asian Markets), Tetra Pak. What has added a boost to the city's growth factor is the buoyancy of the special economic zones (SEZs) with investments pegged at Rs 15,000 crore. Pune will have SEZ-notified zones in Manjiri, Phase III Hinjewadi, Kharadi and Magarpatta and will be home to the first Biotech Park by the Poonawalla Group.

Bharat Forge, Mahindra & Mahindra, Videocon Group, and General Motors are among some of the corporates that have announced their SEZ projects. Meanwhile, after auto and IT industries, the city is fast becoming a hub for heavy construction machinery industry. In the last two years or so, three mega projects of original equipment manufacturers (OEMs) in construction and earthmoving equipment have opened their plants in Pune.

But this is not to say that there are no road bumps ahead. The infrastructure in Pune has definitely not been able to keep pace with its industrial growth so that local transportation, the lack of an international airport, power shortages, increasing congestion, and alarming levels of pollution are some of the issues that need to be addressed urgently.

"The civic governance of Pune needs to be improved immediately or else the pace of growth might suddenly be axed if the city cannot take the pressure any more.

And yes, an international airport is certainly needed but with the government unable to decide about the location, the probability of it happening soon is now becoming remote," opines S Vaidyanathan, Director, Action Technologies.