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“The customer should benefit”
What was the thought behind this acquisition?
The Indian market is growing very rapidly. From Hexagon’s perspective as well as the Indian point of view, we need to grow faster and this requires investment. Hexagon could help us achieve this objective. As per Ola Rollén, CEO and President of Hexagon AB “The acquisition of Elcome Technologies is an important piece in our global growth strategy in the emerging markets. India will certainly become one of the most important markets for measurement technology solutions, and with the acquisition of Elcome Technologies we are setting a strong foundation for Hexagon’s further expansion and market leadership in India”. In addition, Now that we are part of Hexagon, we (Elcome) have much better say in the design and features of the future products that are suited to Indian market requirement. In fact this is already happening and one of the prime example is the introduction of TPS801, which was specially designed and produced for Indian Market.
Would there be any change in the business model?
Our business model will remain the same. We are going to remain Elcome Technologies and our model has been to provide the vast product basket and turn key solution to the Indian customer community. We strongly believe in providing solution based on customer needs and not enforcing just what we have. We will continue to offer Leica, NovAtel and other products and solutions. The only change is that all the shares of Elcome have been bought over by Hexagon. Hexagon will now own 100 per cent of the company.
Are you going to diversify in R&D, manufacturing?
Elcome is looking very seriously at the Indian satellite program and we are working with NovAtel very closely in that regard. There are new technological developments – ISRO (Indian Space Research Organisation) is planning to launch IRNSS, which will have signals in L1, L5 and S band, which is completely a new design. Additionally, in L1 and L5, it is not the same frequency. And this has nothing to do with this acquisition since this was happening even earlier. However, this acquisition makes our life that much more easy because NovAtel and Elcome Technologies belong to the same parent company – Hexagon.
How organized is the construction industry in India?
Not yet but they are moving towards that. We can already see a very fundamental change in the last 3-5 years. If you look at the world scenario, approximately 1% of the total construction cost goes into the survey equipment. However, India is not there yet. If you compare with China, where the market for surveying equipment is touching $1bn. India is no where near this at the moment. India being a democratic country it is a difficult task to implement changes quickly. It was easy for China to implement quality. I think it goes back to fundamental issues. Everything is controlled by the consumer. The day the consumer becomes quality-conscious, builders will not have any choice.
How significant is the duty aspect on GPS?
I think India has to reduce the duty to play on the world stage. The duty has to come down; the question is how fast will it. They have to get in line with the WTO. Last year it was 36 per cent, now it is 31 per cent. The problem in India is that they reduce custom duty but they increase something else. India is a price-sensitive economy. However, as soon as the customers look at the final result, they will make a different decision. If you look at the lifetime cost, the efficiency, the accuracy, you will make a different decision than just by looking at the entry cost only. In the tender business, these are subjective issues. How do you add them up to make them objective? In the foreign countries, they do provide certain percentage to certain technicalities, commercial viability, features, quality etc. and then they do a matrix and come up with a number. In India, any matrix becomes a subjective evaluation. I have been trying to promote an annual maintenance contract. And the purpose of the maintenance contract is to measure the lifetime cost. The tender only looks for the entry cost which is less important than the lifetime cost.
What advantage would the customer get out of this acquisition?
At the end of the day it is the customer who should benefit from it. We are very customer-focused and the customer is going to get much better support. Support does not mean just service. It also means our accessibility to the customer, our quality of equipment and services. We will open more offices, more service workshops, that means we are there where customer is and the turnaround time for the customer support will reduce. We would like to make our valuable customer more efficient, and this acquisition will fulfill this goal.