30 Advance Technology Devices - Time For Equity

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DQI Bureau
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PARTNER: ML Tandon
‡ PRODUCTS AND SERVICES: Peripherals ‡ START-UP YEAR: 1986 ‡ EMPLOYEES:
1669 ‡ QUALITY CERTIFICATION: ISO 9002

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ADDRESS: 59, SDF-II, SEEPZ, Andheri (E), Mumbai 400096 height="8" alt="https://img-cdn.thepublive.com/filters:format(webp)/dq/media/post_attachments/9cfd9e00d46b35dd196e8b35946c9d1acd61f0e73133c8d2c8f22a81a6071220.gif (272 bytes)"> TEL: 8290306 height="8" alt="https://img-cdn.thepublive.com/filters:format(webp)/dq/media/post_attachments/9cfd9e00d46b35dd196e8b35946c9d1acd61f0e73133c8d2c8f22a81a6071220.gif (272 bytes)">  FAX: 8291176

PERFORMANCE HIGHLIGHTS

  • l Fall in revenue by 32 percent from Rs 151.2 crore to Rs 101.8 crore
  • l Rise of 12 percent in units manufactured in 1997-98
  • l Fall in employee strength from 2604 to 1669
  • l Increase in productivity from Rs 5.8 lakh to Rs 6.1 lakh per employee
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    The company was started in 1986 by ML Tandon of the Tandon Group, with a vision
    to make the country a manufacturing base for world-class IT products. With short-sighted
    and restrictive policies of the Government, limiting the number of products manufactured
    in an export organization, Tandon created four different IT product companies. Advance
    Technology Devices was the company created to make Hard Disk Drive (HDD) heads, head
    gimbal assemblies and voice coils.

    In the past, this Tandon company used to export components to IBM, Xerox, Matsushita
    and Mitsubishi. However, in the highly volatile markets of present-day IT manufacture,
    with inventory, order bookings and deliveries fluctuating on a daily basis, even a client
    list cannot be regarded as static. Currently, the list includes Seagate, Western Digital,
    Syquest and Iomega. Looking at the financial performance in the last year, revenue fell
    from Rs 151.2 crore in 1996-97 to Rs 101.8 crore, a drop of 33 percent. The number of
    units exported rose to 1.89 million, a growth of 12 percent over last year.

    The manufacturing plant, spread over 60,000 square feet in Santa Cruz export processing
    zone, manufactures HDD heads for the capacity range 2 to 6 GB per platter. For this
    product range, it uses the latest magneto-resistant technology. The plant also
    manufactures the older technology, double-metal insert gap heads, which support platters
    in the 1 GB range. The plant has an ISO 9002 certification rating and claims its
    clean-room standards are equal to the best in the world.

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    At the surface level, with a substantial export turnover and a reasonable market-base,
    the company appears to be placed in a comfortable position. However, the reasons for its
    inconsistency in growth and turnovers cannot be ignored anymore. The ranking of the
    company, in the DQ Top 200 list, has fluctuated from #18 in 1995-96 to #19 in 1996-97 and
    is now #30. The turnover has risen to a high of Rs 151.2 crore in 1996-97 and then fallen
    to a low of Rs 101.8 crore in 1997-98. The number of employees in 1997-98 has been slashed
    to the level in 1995-96.

    The primary reason for the wide fluctuation in 1997-98 and other financial performances
    has been its tenuous link with the global market scenario. With the strategy of all
    revenues from one product and market segment translating into a weakness, the company has
    become particularly vulnerable to volatility. The other weakness the company faces is the
    lack of any contract manufacturing alliances. The need to continuously invest in acquiring
    the latest manufacturing technologies with little research and development infrastructure
    is probably another weakness.

    When comparing this Tandon company with other global manufacturing companies, one
    detects a definite need to strategically reorganize the company. An effective way of doing
    this would be through inviting minority equity investment from a global major