Engineers at Caparo, the UK-based engineering company, are experimenting with using bamboo instead of metal in cars and aircraft. This surprising use of a plant usually associated with panda food underlines the innovation that Angad Paul, chief executive of Caparo, is trying to inject into the family-owned group founded 40 years ago by Lord Paul, his father.
His strategy of moving Caparo into more sophisticated areas of engineering and design, combined with expansion in India where the Paul family has its roots, illustrates how even established companies sometimes need to adapt.
Lord Paul, 76, has over the past decade gradually taken a back seat at Caparo. But his guidance remains vital to 38-year-old Angad, says the son. Angad also seeks advice from a group of non-executives recruited in the past two years to bring in a wider expertise, but he has been known to call his father at any time of the day or night, he says.
As chairman of Caparo, Lord Paul spends roughly a day a week on company matters. He stresses he was determined that Angad should have room for manoeuvre when he appointed his son as chief executive, the first the company has had, just over five years ago. “I told Angad that from this point onwards, I answered to him,” says Lord Paul, as the two men, side by side in Caparo’s modest London head office, explain their partnership. Angad says his father’s experience is highly useful. “I might be worrying about something such as a problem with a supplier – if I mention it to my father, the chances are he dealt with something similar 30 years ago.”
Newly arrived in the UK from India, where he was a qualified engineer, Lord Paul started Caparo, with very little money. The company has grown to become one of the UK’s biggest privately owned engineering businesses.
Angad studied economics and, out of three sons, emerged as the most entrepreneurial, which destined him for the chief executive title.
In the past five years, the company has spent about £200m buying more than 20 companies in the UK while setting up 32 new plants in India. In 2008, Caparo expects sales of £1bn, just under half coming from the UK and the rest from the US, Europe and India. The company – with 86 factories and office locations – employs some 9,000 people, of whom 4,800 are in India and 3,100 in the UK (the figure in India will fall when the new plants are fully commissioned).
Angad – who exudes enthusiasm for engineering – says there are “immense” opportunities for expansion in this field, especially because of Caparo’s private ownership. Not having external shareholders to worry about means he can concentrate on the longer term. “I am less concerned with what earnings are likely to be this year, than in 2011,” he says.
This could seem a touch insouciant, especially as Caparo’s current profitability is nothing to shout about. This year it expects operating profits of £50m, a meagre 5 per cent of expected sales. Caparo made the same profit in 1996, when revenues were a lot lower. However, if this projection holds, the earnings figure will at least have shown a decent rise on 2007, when operating profits were £18.2m on sales of £686m. By 2010, Angad hopes to push up operating profits to £80m. And he is bold enough to think – such is the current rate of expansion – that by 2020 revenues could come to £7bn, split roughly equally between customers in Europe, Asia and North America.
Many of Caparo’s new operations, both in the UK and India, are focusing on higher-value, design-led areas of engineering, particularly in automotive.
An example is Caparo Vehicle Technologies, a new 35-strong business that is examining new concepts in vehicle design including use of new materials, such as bamboo and novel kinds of carbon-fibre-based composites. The Basingstoke company created Caparo’s own high-tech demonstration racing car, which competed in this year’s Le Mans 24-hour race – part of Angad’s push in new, image-conscious directions.
Until recently, most of Caparo’s operations involved producing unsophisticated steel-based items including fasteners and parts used in the construction industry. Accordingly, a danger always loomed – even as the company expanded in the 1980s and 1990s – of Caparo being undercut on price by lower- cost rivals, for instance in eastern Europe, while having little to offer customers interested in more upmarket, design-intensive products. When Caparo duly made a loss in 2002, on sales of £303m, both Angad, as the new CEO, and his father recognised the need to change direction.
Crucial to the change of course is a new role for Caparo’s 1,000 product development engineers. “The ratio [of] engineers to total staff [of about 15 per cent] is nowadays not all that much different to the early 2000s,” Angad says. “But today we try to use the engineers’ skills more sensibly. More of their work concerns talking to customers about their specific requirements, and designing products and systems that will meet these needs, rather than developing standard products that they think will work better than the previous ones.”
Examples include efforts to design new kinds of ultra lightweight, but strong, fasteners that might be used in aerospace or new kinds of engine component, made with novel casting techniques, for use in the automotive industry. Angad says that while in 2002, only about 15 per cent of Caparo’s sales came from “design-intensive” areas of engineering products, in which the company had to back a big development effort to fit products to customer needs, today the figure is roughly 50 per cent.
The other main thrust for the company – the push into India – will take some time to show results. But the company hopes its sales in India – which reached £62m in 2007 – will roughly double this year and reach about £250m in 2011. That projected growth is linked to expected rapid expansion in the economy in India, particularly in the automotive industry, where Caparo’s India-based customers include leading groups such as Suzuki Maruti, the country’s biggest carmaker, plus the Indian subsidiaries of businesses such as Toyota, Nissan and Honda.
Angad says Caparo has a “fantastic” chance to build on its good relationship in India with Tata Motors by making further progress on supplying design-intensive engineering parts to Land Rover and Jaguar, the two UK brands that Tata bought earlier this year.
It is this kind of cross-fertilisation between ideas generated in the UK and India that the two Pauls hope will act as the basis for their group’s growth.
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