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Cluster Study

Rajkot Foundry & Forging Cluster

(October 2009)

Submitted By

Mandar Hukeri & Rajeev Thakur (Management Trainees)

SME Business Unit Corporate Centre, Mumbai

Cluster Study Rajkot Foundry & Forging Cluster (October 2009) Submitted By Mandar Hukeri & Rajeev Thakur

Cluster Study: Rajkot Foundry & Forging Cluster


Sr. No


Page No.





Foundry industry



Production process used in Rajkot foundry cluster



Raw Material Sourcing



Institutional Set-up in Rajkot



Cluster Situation:



SWOT Analysis of Rajkot foundry Cluster:



Research Objective & Research Methodology



Market Size, Market Share & Market Potential



Observation from Primary Research



Strategy & Action Plan:





Annexure 1: Respondents


Annexure 2: In depth Interview Guidelines


Annexure 6: Leads



Cluster Study: Rajkot Foundry & Forging Cluster


The Indian metal








Indian civilization and its

primordial manifestations were found in the religious figures like 'Natraja', the dancing deity. The root of modern metal casting industry was laid out in the year 1850 A.D and grew with the development of the engineering sector.

A peculiarity of the foundry industry in India is its geographical clustering. Typically, each foundry cluster is known for catering to some specific end-use markets. For example, the Coimbatore cluster is famous for pump-sets castings, the Kolhapur and the Belagum clusters for automotive castings and the Rajkot cluster for diesel engine casting.

Rajkot foundry cluster consist of micro small and medium scale units of foundry and forging. The study has been conducted during 26 th October to 30th October 2009 and focuses on the research of Foundry cluster in Rajkot. Rajkot is an important foundry cluster in Western India. There are about 1100 units at Rajkot. The intention of this study is to find out market share and market potential of SBI in this cluster and forming strategies to improve it.

The study consists of primary and secondary research. Under primary research we have conducted in-depth interviews of industry stalwarts and leaders of associations and a survey of around 20 units in the Rajkot foundry cluster.

The study reveals the existing picture of Market size being Rs. 500 Cr out of which SBIs market share being around 27 % in terms of advances. The study also includes strategies and indicative action plan along with timelines to achieve the target market share of 40- 50%.


Cluster Study: Rajkot Foundry & Forging Cluster

F oundry Industry

There are about 35000 foundries in the world with annual production of 90 million metric tones, providing employment to about 20 lac people. USA tops the list in alloy production followed by China, Japan, Germany, and the CIS. In terms of number of foundries China has the highest score (9374), followed by India (5000) and then CIS (4000). The share of Iron foundries is the maximum i.e. almost 56.21%, followed by steel with 14.31% and then the non-ferrous ones with 29.48%. The growing environmental concerns and globalization of economies have led to a closure of some 8000 foundries in Europe. These countries have been contemplating to shift their business to the low labour cost centres i.e. the developing countries.

There are more than 5,000 foundry units in India, having an installed capacity of approximately 7.5 million tonnes per annum. The majority (nearly 95%) of the foundry units in India falls under the category of small-scale industry. The foundry industry is an important employment provider and provides direct employment to about half a million people.

Rajkot, located in the state of Gujarat, is an important foundry cluster in Western India. There are about 500 foundry units at Rajkot. The cluster came-up mainly to cater to the casting requirements of the local diesel engine industry. The geographical spread of the cluster includes Aji Vasahat, Gondal Road, Bhaktinagar Ind Area, Mavdi Plot and Bhavanagar Road areas. Majority of the foundry units at Rajkot produces grey iron castings for the domestic market. A relatively small percentage (about 10%) of the foundry units export castings such as electric motor castings, etc. Apart from oil engines, the foundry units at Rajkot cluster caters to a number of other end-use applications, as can be seen from the table below.

Cluster Study: Rajkot Foundry & Forging Cluster F oundry Industry There are about 35000 foundries in

Cupola is by far, the predominant melting furnace used by nearly 90% of the foundry units. Most of the cupolas are of conventional type. A local cupola design, called 'Rajkot cupola', is quite popular in the cluster. Use of low ash coke is common among the foundry units. A smaller number of foundry units (about 10%) producing castings for the automotive industry use electric induction furnace for melting.

The foundry men have to take care of numerous parameters, right from selection of raw materials to dispatch of the final product. This demands technical knowledge for ensuring good quality castings.


Cluster Study: Rajkot Foundry & Forging Cluster

Production process used in Rajkot foundry cluster

A Foundry deals with the process of casting of moulds formed with sand or some other material. The whole process can be classified into six stages, which are:

  • - Designing by Methoding and Gating: The design supplied by the customer is further designed to provide necessary allowances and selection of parting line. Methoding and Gating are the tools to achieve this. While Methoding consists of feeders, which compensate the shrinkages in the castings, the Gating system consists of spruce and runner and in-gates that allow the molten metal into the mold. This is the crucial step and entails developmental time of 2 to 3 months, and in certain cases it can even take upto 8 months. The process is usually carried out on trial and error basis.

  • - Pattern making: This refers to the Replica of castings that are prepared on the basis of drawings given by the Customer. These patterns are usually made with wood.

  • - Molding and Core making: Moulds are prepared in the sand with the help of patterns to get the same shape as that of the pattern. Core making is useful for getting hollowness in the castings.

  • - Melting and Casting: Metals are melted in suitable furnaces to get the required composition and then the molten metal is poured into the moulds by means of 'ladles'.

  • - Fettling: After solidification, the castings are removed from the mould boxes and unwanted metal attachments like runners and raisers are removed and the sand adhered to the casting is cleaned. Later these castings are sent for further operations like heat treatment and machining.

  • - Testing and Inspection: Before dispatching of the components, visual and dimensional inspection is carried out. In some cases, as per the customer requirement, non-destructive tests like ultrasonic radiography etc. are carried out to know the internal soundness of the casting.

Raw Material Sourcing

The raw materials constitute 40 to 70% of manufacturing costs, depending upon the segment of the industry. A majority of the foundry units are procuring raw material through dealers from Rajkot and traders on a 30-day credit basis. As a result, sometimes, the purchasers are constrained to purchase inferior raw materials from the traders at a higher price. Only few entrepreneurs are resorting to bulk purchases directly from manufacturers and enjoying cash & quantity discounts. Lack of working capital and lack of awareness on discounts are the reasons attributed to purchasing from local sources. Aluminium is sourced against LC/Cash. The "Pressure Die segment" is mostly engaged in conversion and therefore, the customers themselves supply raw material.

  • - Process material: Sand, Sodium Silicate, Coal dust, Bentonite, Co2 gas, mould coats, foundry fluxes and chemicals are some of the process material used in the casting industry. River and Silica Sand are sourced from local quartz processing industries. The rest, like Chirala & Bentonite are available locally.

  • - Consumables: Furnace oil, an essential ingredient for running furnaces of Non- ferrous segment is procured from IOC dealers by large and medium units, whereas the small units owing to a lack of storage capacity and explosive


Cluster Study: Rajkot Foundry & Forging Cluster

license, procure only from the local traders. They often complain of adulteration in oil affecting their production and productivity.

Most of the raw material is procured by either relying on visual inspection or by a test certificate provided by the suppliers, or sometimes on oral assurances by the traders. In-house testing facilities are not available with the units and if the material is sent for testing in labs, their cost will go up significantly.

Institutional Set-up in Rajkot

There is a well-established network of support institutions catering into the needs of the industry, which are listed below:


  • - Heat Treatment Service Providers: There are some treatment service providers existing in the cluster. They provide heat treatment to non-ferrous casting segment either through oil fired or electric heat treatment furnaces. They blame the foundry units if castings are not responding to heat treatment pointing out the composition of castings, even though, at times, the problem many times is due to poor calibration.

  • - Machining service providers: Reportedly, their charges are high and they don’t keep up to the delivery schedules, which ultimately leads the castings manufactures to default their delivery commitments. Due to their exorbitant charges, the cluster is not able to compete with manufactures of other places like Bangalore.

  • - Consultants: A large pool of scientific talent







Foundrymen do not fully utilize their services due to a lack of appreciation of the same.


  • - GIDC: Gujarat Industrial Development Corporation has established industrial estates of no of varities from functional to general type from large to mini including worksheds in nearby villages. Rajkot has had privilege of being selected for the very first industrial estate in India.

  • - RCCI-- Chambers of Commerce, Gujarat: The Rajkot Chamber holds seminars, workshops and discussions on different subjects related to the trade and commerce and also organize coaching classes engaging eminent charted accountants, Tax consultants etc. who impart primary knowledge to the businessmen, industrialist and their administrative staff regarding Income Tax, Sales Tax, Vat and other taxes of state and central Governments

  • - C-MAT LAB: Center for material testing: This institution was set up by the Government. Apart from the development activities it provides testing facilities to the industry in general.


Cluster Study: Rajkot Foundry & Forging Cluster

  • - Private Testing Laboratories: There are five private labs for testing the chemical composition of raw materials and product composition. They are not accredited by reputed agencies like NABL and lack qualified personnel.

  • - DIC – District Industries Center, Rajkot: The DIC helps the industry in getting provisional and permanent registrations through a newly set up single window clearance system. It also guides the new entrepreneurs to setup industries.

  • - Teri:

  • - Gujarat Pollution Control Board: Apart from its role as a regulatory agency, it is assisting the industry in creating awareness on pollution norms related to foundry. They have been encouraging the industry to adopt pollution control devises such as cyclones, dust collectors, wet scrubbers etc.

  • - Government Polytechnic Ahmedabad: It is a State Government technical institution. It imparts training and education in the field of foundry. The institution regularly sends its students of Diploma in Metallurgy to various foundries for a one year training period.


  • - Institute of Indian Foundrymen (IIF) - Ahmedabad Chapter: Institute of Indian Foundrymen (IIF) which is a National body registered at Kolkata was set up in 1950, with the prime motive of development of Indian foundries. The IIF works through its head office at Kolkata, four regional branches at 4 metros and 27 Chapters spread all over India. It has strength of 300 members and disseminates information to them through the Indian Foundry Journal. Its other activities are


To organize the annual Indian Foundry Congress


To organize exhibitions of equipments


To arrange buyer-seller meets


To promote the export of foundry products and related services


To provide technical services to the member companies


To maintaining the data bank of foundries and suppliers

The institute is a member of World Foundrymen organization (WFO), Zurich and Confederation of Indian Industry (CII), New Delhi. The Ahmedabad Chapter of IIF has taken a lead role in developing the foundry industry in Gujarat.

  • - REA- Rajkot Engineering Association: An association having around 1200 members ,cters to the need of representation of the cluster. Facilitates training through seminars and events.


All the above organizations are extending their help for energy auditing and waste minimization. The industry has availed their services quite well in the past.


Cluster Study: Rajkot Foundry & Forging Cluster

Cluster Situation:

Un-Healthy Competition: Most of the products being manufactured are to serve the needs of local industry, which has a limited area. This leads to unhealthy competition between cluster units and results in severe undercutting of prices. The firms do not express any collaborative behavior amongst each other.

Poor Foundry practices in majority of the units: A high level of rejection rate owing to poor foundry practices has pushed the cluster to operate at a high volume and low margin segment, which does not demand quality. Thus, this cluster is not seen as a significant quality producer in general.

Inadequate efforts to tap the niche markets: The cluster offers a vast potential for reverse engineering to enter into niche markets like Defense and Space technology. There is also an availability of institutions for facilitating this process.

Government Institutions are under -valued: The support institutions set up by the Government have been perceived to be too general and ineffective to help the industry.

Mistrust on private laboratories: Though private laboratories are known for timely delivery of test reports yet many times there are variations in reports of one laboratory vis-à-vis another. This is adversely affecting the quality of the product.


Technological issues:

  • - Raw material Characterization - testing of raw material

  • - Awareness about the standards of BIS, ASTM & BS with regard to raw material and final products

  • - Vast Improvement scope in foundry practices

  • - Methodizing systems

  • - Conservation of energy & Introduction of Divided Blast Cupola

  • - Waste minimization & Pollution norms

Managerial issues

  • - Formal Management Skills required

  • - Introduction of Management Information systems

  • - Training of Executives, supervisors and workmen

  • - Benchmarking with other foundry industries

Financial Issues

  • - Managing the working capital

  • - Promotion of Bill culture

  • - Introduction of new working capital instruments e.g. JIT inventory

  • - Cost reduction across the board through bulk purchases of raw material and joint- marketing

Marketing Issues

  • - Pricing of products

  • - Scouting of domestic and export markets

  • - Participation in Buyers-Sellers meets in domestic and export markets

  • - After sales service to the customers

Support Institutions

  • - Interactions with associated institutions (SISI, CITD, NSIC, PCRA, Engineering colleges etc.)


Cluster Study: Rajkot Foundry & Forging Cluster


Involving final year Engineering students in Foundries as a part of their summer programmes


Exposure visit of IIF– Ahmedabad Chapter to other Places and its strengthening

R&D Issues


Characterization of raw materials


Preparation of manual on Foundry practices


Prototype Development

SWOT Analysis of Rajkot foundry Cluster:




Wide range of segments like fan, C.I. mould, automobile, refrigeration, Sanitary and Non-

ferrous sand & gravity die-castings.


Wide range of customers


Caters to all type of moulding industries


Catering to niche markets like Space and Defense.



Availability of AUTO CAST software which can increase the yield and reduce lead time

AUTO CAST will make the first pour-right concept, thus reducing the rejection rate and decreasing the raw material cost by 15%. Inputs Availability



Dealer network for supply of pig iron, steel scrap, Al and Coke.

Easy access to silica sand, quartz sand and other materials. Skills



Skilled and unskilled labour is available.


Presence of Government polytechnic which conducts Diploma courses in Metallurgy.

The entrepreneurs are mostly experienced in the foundry line and in some cases there are technocrats managing the units. Innovation capabilities



Specialization in product development.


Presence of a vast pool of consultants




Most of the foundries are supplying only to the domestic market


Diesel parts manufacturers have the highest share in terms of volume within the cast iron segment, where margins are thin and commands lesser price.


Lack of marketing personnel in the manufacturing units.


Lack of knowledge about markets available for similar products in other parts of the country.


Concentration only on rough castings instead of finished/sub assemblies.


Lack of network with major industries that require castings in large quantities.

Auto parts Industry predominated by unorganised sector. Technology



Lack of technical know-how in raw material characterisation.


Non-adoption of scientific foundry practices.

Existing cupola's are inefficient in terms of coke consumption-awareness of Dividend blast cupola, which is an alternative is low. Inputs availability



Cluster Study: Rajkot Foundry & Forging Cluster

  • - Use of poor quality scrap and untested raw materials and alloying

  • - Use of adulterated furnace oil in non-ferrous sector.

  • - Innovation capabilities

  • - Except non-ferrous segment, other segments do little innovation

  • - Mainly concentrating on low value products


  • - Non-appreciation for good and proven gating and melting practices.

  • - Lack of M I S systems.

  • - Pre-occupied with pouring aspect only and little understanding of other organizational aspect.

  • - Lack of awareness particularly to bill discounting and management of working capital.

  • - Lack of collective action for bulk purchase of raw material like pig iron, Aluminium, coke and Furnace oil for reduction of cost.

  • - Lack of standardization and testing procedures by testing laboratories.



  • - Spending on niche sectors can increase the opportunities for developing products and castings of high value for critical applications.

  • - Growing environmental concerns in foundries of western countries provides opportunities for sourcing of castings from developing countries like China and India. Technology

  • - Lot of scope for advancement


  • - China could be a strong competitor and make rapid technological advancements in terms of quality, delivery schedule and effective price.

  • - The new environment policy emboldened by the Supreme Court of India for necessary energy savings, clean technology or eco-friendly process will impact the cost of castings.


Cluster Study: Rajkot Foundry & Forging Cluster

Research Objective

  • - To find the Market


Foundry cluster of Rajkot.

Market share & Market

Potential of




  • - And to devise strategies and action plan to increase the Market share.

Research Methodology

Primary Research

Part 1: In-depth interviews

Part 2: Direct interviews

In-depth interview were conducted on industry association members, industry leaders, Government bodies. The questions were put up to understand the Foundry cluster in Rajkot.

Direct interviews were administered to 20 different sized SME units. The Questions were focused on Turnover of the unit, Banking requirements of unit Current banker.

Please refer Annexure 1 for the respondent details.

Please refer Annexure 1 for the respondent details.

Secondary Research

Secondary Research was done to get an outlook on global & Indian Foundry industry.


Turnover wise breakup of cluster units


Fund Limits


No of Units (Approx)


<1 Cr

< 5 Cr




> 5 Cr












Cluster Study: Rajkot Foundry & Forging Cluster

Market Size, Market Share & Market Potential



% of No.



based on



of units



(Rs. Cr)



(Rs. Cr)



(Rs. Cr)

of companies required funding



(Rs. Cr)



(Rs. Cr)


Share %

A (<1 Cr)









B (>1 Cr)






  • 410 124









  • 498 134


Total number of units= 600 units

WC /Sales turnover

= 13 % For Category A units (Assumption based on survey)

= 19 % For Category B units (Assumption based on survey) Cash Credit Potential of each slab = (Number of units) x (Avg. Turnover) x (% of WC/ Sales Turnover) x (% of No. of companies required funding) x (% of WC not self financed)

Total Turnover of the Cluster Market Potential for Cash Credit for SME

SBI Market Share & Targets:

In terms of value,

= Rs.3360 Cr (Approx) = Rs.500 Cr (Approx)

  • - in Category A units, presently SBI has around 11% (Rs.10 Cr) share in the market

and target can be set to reach 25% (Rs.22 Cr) i.e. additional 12 Crs can be booked.

  • - in Category B units, presently SBI has around 30% (Rs.124 Cr) share in the market

and target can be set to reach 40-50% (Rs.185 Cr) i.e. additional 60 Crs can be booked.

In all together a business target of around Rs. 75 Crs and can be set for a 1 year period with existing SME asset products and adopting and implementing the strategies suggested.

In terms of no of units, presently only 74 units are availing facilities with SBI, target can be set to reach to 300 units (40 % of the Market).


Cluster Study: Rajkot Foundry & Forging Cluster

Observation from Primary Research:

The primary research was carried on a sample of 20 SMEs to understand the structure of the industry and their financial needs. The sample is selected based on turnover and banking with which bank

<1 Cr Limit banking with SBI


>1 Cr Limit banking with SBI




<1 Cr Limit not banking with SBI >1 Cr Limit not banking with SBI




  • - It is observed that the market share of SBI in this cluster is below the reasonable level and stands at just 27%. The circle has financed 74 units with an overall exposure of Rs.134 crores. Another Rs.75 Cr of business is possible to achieve.

  • - 15-20% of total turnover gets exported.

  • - Beside SBI other prominent banks in the cluster include Bank of Corporation Bank, OBC, Bank of India and HDFC.

  • - The cluster lacks in the awareness about various SBI SME’s Asset as well as Liability products.

  • - Post slowdown the units are carrying excess capacities than the orders in hand, so there seems not much scope for term loans at this moment. However, the cluster units are far away from the technological advancement of the manufacturing processes and plant setup. An initiative in technological advancement will generate huge scope of term loan facilities after some one year period. TERI is conducting a technological diagnostic study in the cluster for the same.

  • - The cluster unit needs awareness on marketing, export promotion, skill up- gradation etc.

  • - There is scope for technology upgradation through out the cluster for energy efficiency, manufacturing process and lab facilities.

  • - The risk associated with the cluster is rejections due to not meeting the quality standard

  • - Fluctuating prices of right quality of raw materials is another risk factor.

  • - SBS’s branches were having well presence and customer relationship in Rajkot city.


Cluster Study: Rajkot Foundry & Forging Cluster

Strategy & Action Plan:

In a short term, i.e. in a period of one year to achieve the set targets of Rs.75 Cr we should take following actions immediately:

  • - Currently there is huge scope for working capital finance and there is lack of awareness about SBIs existing offering in the cluster. We shall promotion of existing SBI SME schemes like SME Credit card and SME Smart score through email & SMS campaign.

  • - We shall sponsor and participate in the cluster events, seminars arranged by ‘District Industries Centre’. We shall also advertise SBI SME products in cluster publications and local publications and arrange SME meets in association with Rajkot Engineering Association.

  • - Association with TERI / SIDBI for generating awareness in the cluster of technology upgradation. This will give us a platform to develop relationship with the non SBI units

  • - We suggest the consultancy services cell to conduct a feasibility study of the cluster to understand the technical needs of the cluster which will help us to decide on taking up the cluster for Project Up tech.

In a long term, if the cluster is found feasible for project uptech we shall designing specific scheme for the cluster. The study reveals that this cluster lacks in technology compared to other foundry cluster in India.

SBI should follow a top-down approach i.e. improving the relationship with the industry stalwarts and association by having meeting with them, to give them assurance about the SBI’s better offerings and service quality. This will help to convert these prospective into customers. As these industry stalwarts are the influencers/power center of the industry, the smaller units tend to follow the industry leaders and thus it will be easy for SBI to penetrate/capture the smaller accounts. The president of associations expressed willingness to have a joint meeting with SBI’s senior officials.


Cluster Study: Rajkot Foundry & Forging Cluster


  • - Primary Study: Interview of Units & Industry Stalwarts

  • - Secondary Study: Various reports, Association Bulletins, Web sites, Directories

  • - Latest news in Business Standard


Cluster Study: Rajkot Foundry & Forging Cluster

Annexure 1 Respondents of In-depth Interviews


Contact Person


Rajkot Engineering Association

District Industries Centre




Gujarat Industrial development Corporation


SME Respondents






Cluster Study: Rajkot Foundry & Forging Cluster

A nnexure 2 In depth Interview Guidelines

Industry Trend: YoY Growth & future prospects

No of units in Rajkot

No of units in operation an reason for closures

Value chain and various stakeholders

Funds required by the cluster every year

Working Capital / Sales Turnover (percentage)

Exports %

Banking Needs of the cluster

Cluster’s expectation form Banks

Pain points with Banks

Opinion on existing financial products features

Expansion plans of units in cluster

Most preferred bank other than SBI

Pricing trend & Margins available for the players in the clusters

Turnover slabs and breakup of total no of units

Pollution related risks to the cluster and steps taken to mitigate it.


Cluster Study: Rajkot Foundry & Forging Cluster

Annexure 3

Prospective Leads