Think of Belagavi, and what comes to mind is the special sweet of Kunda that is made here. It has also been the battleground for the political slugfest between Maharashtra and Karnataka, over which state the city should be part in. But this city is also now becoming a crucial cog for commercial aircraft travel.
Drive out of the city of Belagavi in northern Karnataka, and you are greeted by a huge arch stating Aequs Special Economic Zone (SEZ). Nestled amid greenery and spread over 250 acres, it is from here that companies like Airbus are sourcing several of the parts that go in their commercial air planes.
Manufacturing aircraft parts requires precision engineering and Aequs Limited has steadily built expertise and scale here over the past 15 years. Aequs already manufacturers close to 7,500 wheels per year and thus far has cumulatively made around 25,000 wheels.
That apart, it assembles over-wing exit doors and plug doors for commercial aircraft like the Airbus A321 NEO, it makes structural assemblies for wings and fuselage for Airbus A320. It has also manufactured wing panel assemblies for Airbus A380 programme. That's been possible thanks to a 10,000 tonne hydraulic press that it operates, its the largest in the country.
The company reported revenue of around Rs 1,000 crore last year and the company is continuously investing and expanding capacities to keep pace with the changing technology and growing demand in the aerospace space.
“On an average at least 10 per cent of our revenue goes towards investment,” Aravind Melligeri, the executive chairman and CEO of Aequs tells THE WEEK.
The company, backed by investors like Amicus Capital Partners, Amansa Investments and Steadview Capital among others, is set to go public in India through an initial public offer that will see it raise Rs 720 crore via a fresh issue and an offer for sale of up to 31,772,368 equity shares. An updated draft red herring prospectus related to the IPO was filed by the company this week.
The funds raised from the IPO will be used for repayment of borrowings, funding capital expenditure requirements and acquisition opportunities.
Given the constant investment and the growth that the company sees ahead, there will be continuous requirement of land. Realising this very early, the company formed Aequs Infrastructure, which would set up industrial parks and special economic zones to ensure land was at least not an issue.
“You need to solve the problem holistically and not on a piecemeal basis. I can buy 10 acres, build one building. Tomorrow, I may not be able to build get another 10 acres next door and may have to look at another place. Aequs Infra helps us build clusters where we can bring cohesiveness and bring efficiencies of similar industry and build a supply chain,” pointed Melligeri.
Aequs is in unique position since it not just manufactures the parts it also does the surface treatment in the same SEZ facility. That saves a lot of time and money as earlier parts would travelled across many countries before they were finished.
“Earlier the in-country value add was only 20 per cent. We just used to do the machining and send the parts back, customers used to do all the treatment. Now, we can do that here and both Airbus and Boeing approved this facility the day we put it up,” pointed Melligeri.
The company operates a joint venture with Magellan Aerospace for surface treatments. Last year, the two companies partnered to explore setting up an engine maintenance, repair and overhaul (MRO) facility.
Much of the revenue of Aequs comes from aerospace. However, the company has also moved into manufacturing toys as well as cookware in recent years. Earlier this year, the company inked a joint venture with Brazil’s Tramontina to produce cookware and other consumer products. The facility in Hubbali is the first for Tramontina outside of Brazil.
Toys, Melligeri points out, also have a stringent compliance requirement in many, especially developed markets, considering they are meant for children. Similarly, its expertise in surface treatment has attracted interest from companies like Tramontina to manufacture cookware.
However, aerospace will continue to be its largest business. Given that demand for airplanes is growing rapidly - even in India Air India and Indigo have placed record aircraft orders - Aequs sees an endless runway ahead.
“Airbus was producing 45 aircraft per month of the A320 family. They want to go to 75 per month. India is one of the largest consumers. Today global procurement from India is only around 2 per cent. When our aviation market doubles, our procurement should grow five times. That’s the right way to look at it,” Melligeri.
Aequs also does some work for Indian Space Research Organisation (ISRO) and is in discussion with startups in the space industry to see if they want to leverage its capacity.
“We are talking to Indian companies in space tech, trying to help them out. Because we have the capacity to do it. They don’t have the capacity also,” pointed Melligeri.
Aequs currently has 1.4 million man hours of capacity. Current capacity utilisation is at around 70 per cent and it will typically keep adding capacity once it touches around 80 per cent.
Aequs has been manufacturing in Belagavi since 2009 and also has manufacturing facilities in France and the United States.
It is one of several players in India that have seen aerospace demand increasing. In August this year, Mahindra was awarded a contract by Airbus Helicopters to manufacture and assemble the main fuselage of its H125 light single-engine helicopter. Earlier this week, Airbus and Tata announced that Tata Advanced Systems will set up the first private-sector helicopter final assembly line in Karnataka to make Airbus’ H125 helicopters.
Tata Advanced Systems also provides parts for commercial aircraft, including vertical fins and fan cowls for Boeing 737s, and fuel tank access doors for Boeing 777s among other things. Last year, Airbus awarded a contract to parts maker Dynamatic Technologies from Bengaluru to manufacture doors for its A220 family aircraft.