Manufacturing has been the most touted competency of this first PSU of India,
established in 1948. Yet, come to talk about the fiscal that ended 31 March
2004, and an irony surfaces up. Only about 30 percent of ITI's revenues came
from products, with services forming the bigger slice. That in itself is not a
bad trend though. Services is where the big money is, is it not?
Well, look at the company's past two years of financials and it stops
looking as simple as that. The provisional report for the fiscal 2003–04 puts
revenues at Rs 1,278 crore, as against the targeted revenue Rs 2,430 crore. The
shortfall-Rs 1,152 crore. As compared to the previous fiscal revenues, which
stood at Rs 1,795 crore, there was a slump of Rs 517 crore. That year too, the
company had suffered a downslide of Rs 522 crore. So just in two years, the
state-run behemoth is down by Rs 1,039 crore.
The reasons? Well, manufacturing was hit hard, mainly due to a shrink in
demand,. On the other hand, services didn't bring in enough moolah to make up
for the lost business. Prima facie, huge slashing of orders for switches,
transmission terminals, and GSM and WLL equipment was responsible for the
decline. However, the company could have averted this to an extent if it had
gauged the trend at an earlier stage. But then, given the procedural delays in
taking due permissions and clearances from the government, taking radical
decisions wouldn't have been easy.
Of the Rs 383 crore that the products brought in for the company, around Rs
198 crore came from switching equipment. While GSM equipment contributed Rs 106
crore, CDMA and WLL contributed Rs 84 crore. A mere Rs 8 crore came from the
sale of fixed-line equipment., at one time its bread and butter segment.
According to another company segmentation; Cordect, FWT, OCB, DLC, STM, MLLM,
and CDOT accounted for bulk of the production.
As far as customers are concerned, BSNL and MTNL together contributed 60
percent of the revenues, while defense gave the next big chunk at 20 percent.
The remaining 20 percent came from other clients including PowerGrid and
railways.
ITI's mainstay customers were busy revising and re-visiting their
strategies, and couldn't muster the courage to go full steam with their
earlier plans. As a result, many big orders, on which ITI had based its targets,
didn't come forth and it was too late before ITI could realize things and take
corrective measures. In fact, in the fiscal 2002–03 itself, ITI had seen
turnkey services as a new focus area, apart from manufacturing. That year, the
turkey component of the company's overall revenues had stood at 45 percent.
This year, it is as high as around 70 percent.
The company, with its vast experience of manufacturing a wide array of
telecom equipment and successful execution of large projects, is well positioned
to play a long inning as a turnkey player. Tie-ups with ZTE for CDMA and with
Alcatel for GSM and ADSL equipment put new weapons in its armory. It already has
tie-ups with Tellabs for MLLN and Midas for Cordect. The company is looking at a
two-pronged approach for future growth: rejuvenate production with the new suite
of technological know-how, and speed up existing projects. It also feels the
need to become a leaner, hungrier machine by way of shedding some manpower flab
and rationalizing manufacturing. And it's keen to get back to its
manufacturing forte. With Rs 1,200 crore of orders already on hand, ITI is
hoping to double its revenues next fiscal, with products making 65 percent of
the pie.
Do we see a reversal? Watch out.
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