September 20, 2004

Revised October 8, 2007

Indian Institute of Management, Ahmedabad

Sai Coating: Detonation Spray Gun

Detonation spray coating (DSC) was a surface coating technology developed by the
International Advanced Research Centre for Powder Metallurgy and New Materials
(ARCI) in the early 1990s. ARCI was a research institution owned and operated by the
Government of India with a mandate for developing advanced surface finishing
technologies with potential for commercialization. ARCI licensed the DSC technology to
small entrepreneurs as part of its efforts to commercialization efforts in the late 1990s.
DSC was presently being marketed by three such entrepreneurs. Sai Coating1 was one
such firm that has a turnover of Rs. 45 lakhs and has found some customers in the
wiredrawing industry in textiles and was now negotiating with other customers in the
wiredrawing industry (average customer turnover Rs. 10-40 crores) and was also looking
at new customers in, aviation turbine and automobile sectors. Nageshwar Rao, the CEO
of the firm was looking to develop a more methodical approach to establish and extract
value through pricing the product to present and potential customers. The novelty of the
technology and the lack of knowledge amongst customers makes understanding,
establishing and extracting value and, therefore, effective pricing a challenge. It was not
December 2004, and Rao needed to generate scale to go to the next level.
The consumers were primarily industrial units which use components that undergo severe
surface abrasion during operations. Potential, and prove, applications for DSC include the
wire drawing industry as well as the aerospace, automotive, chemical, textile etc. sectors.
Other components where DSC was applicable include cylinder heads, valves & pistons,
camshafts, friction discs etc. In each and every case, choices have to be made depending
on the operating requirements of the component and the specific costs involved. In spite
of the advantages offered by DSC vis--vis competing technologies, Rao was finding it
tough to make much headway in convincing customers to adopt the DSC Gun.
________________________________________________________________________
Professor Arvind Sahay prepared this case solely to form the basis for class discussion. Cases are not
intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective
management.
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Indian Institute of Management, Ahmedabad.
1

Sai is a Hyderabad based firm started in 2001 as an incubated unit with ARCI. Beginning 2003, it has
moved to its own facilities and is now looking to move into new market segments where the technology
can be used.

The DSC Technology

There were more than half a dozen technologies for coating surfaces. These include
thermal spray, laser surface modification, plasma diffusion, diamond-like, cubic boron
nitride and wear resistant coatings. Each of these also has its own unique applications.
In the DSC technology, the desired material to be used for coating the surface, say
carbide, was accelerated to high velocities by detonation of explosive gas mixtures. It
was then made to impinge on a substrate to form a protective layer of coating on the
identified metallic surface. The process takes a few seconds and the coating remains for a
long time. DSC coatings were considered one of the best thermal spray coatings suitable
for any kind of surface. The main component was the `detonation gun (D-gun) which
was a large cylindrical tube that directs the spray being coated on to the substrate. One
end of the tube has the inlet for the reactants at high temperature and the substrate was
positioned at the other end. By properly controlling the substrate movement, both in
terms of spatial position and rotational speed, coatings of desired thicknesses can be
obtained. Using the D-Gun, advanced and hitech coatings, such as carbides, ceramics and
composites, can be sprayed on almost any kind of material surface. Exhibit 1 shows the
various options available for different coatings using the DSC technology and the
operating environments in which they might offer excellent value.
Exhibit 1: Applications for Coatings with DSC
Powder

A12O3

Coating
Operating
hardness
temp. (C)
(HV)
1100
980

Cr2O3

1350

510

WC-Co

1300

560

Cr3C2
NiCr
CoCrAIY

875

1000

400

1200

WTiC+Ni

1300

760

Cu+Ni+In

300

425

A12O3 -Ti
O2

950

700

Application field

Heat/wear resistant coating for high chemical

stability, oxidation and dielectric resistance
High refractoriness, erosion and oxidation
resistance
High heat and wear shock resistance, improved
mechanical impact resistance and smooth finish
High wear resistance bond coat for high
temperature applications
Corrosion resistance bond coat for high
temperature applications
Excellent wear resistance in basic solutions; very
smooth `as-coated finish
Good resistance to galling particularly when
applied to titanium and its alloys
Heat and wear resistant coatings, low coefficient
of friction, semi-conducting coating

The ARCI had originally sourced the DSC technology from the Institute of Problem in
Material Science, Keiv. In the last few years, it not only indigenized but also developed
an advanced detonation spray coating technology. Only ARCI presently has the
technology for the D-guns in India.

Performance comparison with other technologies

The application of any specific coating technology was dictated by the unique
requirement of the environment in which the component was used in. Thus each coating
technology has its own niche area of applicability. A comparison of the properties of the
coats obtained from the different coating technologies is presented in Exhibit 2
.
Exhibit 2: Characteristics of different coating technologies
Plasma
Gas stream velocity (m/s)
Temperature (C)
Max spray rate (kg/hr)
Relative adhesion strength
(higher = better)
Relative process cost (lower =
better)
Power consumption (kW)
Coating porosity (%)

5500
5
2

High Velocity Oxyfuel (HVOF)

400 1200
3100
3
4.5

30 80
1 10

30 100
10 20

10
<1

600

DSC
600 1200
2800
14
5

Due to the wide variety of components and machine parts used across different spectra of
industries, it was difficult to offer a generalized picture of DSCs unique positioning
advantages. The only generalized statement that can be made for positioning DSC
technology was that it offers several unique advantages in niche applications. In the
Indian context, some of these advantages include:
A manifold increase in wear resistance (typically by several orders of
magnitude) compared to other coating technologies available. For the
wire drawing industry it was estimated that using Sai Coatings
detonation spray gun increases the life of the coated wire in use by more
than 300%.
Almost negligible porosity resulting in great applicability where complete
protection of the substrate was critical.
Low substrate temperature allowing usage of soft substrates like
aluminum and copper.
Anti corrosion qualities of carbide and ceramic coating which were
otherwise difficult to coat.
A smooth finish allowing for maintenance of surface luster.

.
Sai Coating makes and sells the D-Gun to the companies that use coating on
components. So cable companies that have wire drawing functions can use the DGun to coat the wires. Turbine manufacturers can use the D-Gun to coat the
turbines for higher performance. At this point in time, Sai Coatings customers
were paying Rs. 15 lakhs to purchase a D-Gun and over its life, the gun can spray
coat more than 100,000 feet of wire (on wire upto 0.5 inch thickness) or 12000 sq.
feet of surface. The coating costs run at Rs. 1.50 per feet of wire and Rs. 20 per sq.
feet of surface area. Sai also provides initial training to the buyer free of cost to set
and run the D-Gun. By comparison, plasma coating and HVOF machines cost Rs.
11 and 18 lakhs, each respectively to the buyer.

Market Segments
Sai Coating who has adopted DSC technology, focuses on three different sectors. It
has developed the market in Wire Drawing, Textiles and Aero Components.
Nageshwar Rao, the CEO of the firm was looking at establishing and extracting
value through various pricing options for the technology for different market
segments.
In the wire drawing industry coatings have been developed for about 90% of the
critical components which operate in a hostile environment. Sai Coating has
captured about 15% of the total wire drawing industry in India.. Customers tend to
think that the present price charged by the competition was the same as that of Sai
Coating per feet of wire coated.
BHEL, which was the main turbine supplier in India, had recently approved the
thermal coating technology using DSC. The turbine valves and spindles used in
turbines form a good market for DSC Technology. Sai Coating has conducted trials
for application of its DSC technology for the turbines. These turbine blades need to
be refurbished with coatings depending on the intensity of their use. Nageshwar
Rao approached this segment as a solution provider to the problem of frequent
refurbishment/replacement of the turbine blades. Users included power stations,
national scientific laboratories, etc.
In the textile industry, requirements came in lots of 100 spindles and valves, which
was capable of filling 20% of the total annual capacity of one D-Gun. A D-Gun
Coating increases the life of the spindle from 1 year to 3 years (as compared to 22.5 years for HVOC and Plasma). In regard to the textile industry the application
was from guide pulleys. The coating enhances their life from 40 days to two years.
The basic cost of the pulley was Rs.275 while the cost of coating comes around to
be Rs.600. So though the cost was more than justified, hesitation arises from the
upfront cost was more than doubled.

In aerospace industry nearly 600 components can be coated using the D-Gun. It has
been specifically mentioned as a regulatory and safety requirement in the
maintenance manuals that many of these components either have to be replaced or
used after thermal spray coating for many components. Most of the refurbishments
were presently been catered by imports from companies like Praxair. Application
coatings for five components had been developed and the result had been positive.
This was one area where the criticality of the components was very high and
environment was hostile. For instance one of the components was priced at Rs.
1.75 Lakhs and it normally lasted for 2 years. It has to be replaced by new
component. DSC presents the opportunity to refurbish the old component, at a price
of Rs.15000, which can be reused for a third year.
DSC technology offers the aircraft and stationary gas turbine industries the means
to resist many types of impact, sliding and fretting wear, and low and high
temperature erosion and corrosion. Recently developed coatings were now being
applied as thermal barriers to reduce metal temperatures and for clearance control.
DSC coatings can also be widely used in the refurbishment of aircraft parts of both
civil and military aircraft engine components and as solutions to similar problems
in stationary turbines. Also coating for the airframes was extremely important due
to both the criticality of the components and the cost of replacing the components.
The environment in a steel mill stresses the equipment as it involves high
temperature, attrition and high pressure tasks. Components were often subjected to
corrosion under high temperature and hence require surface treatment. Rolling pins,
annealing surface rolls, cold and hot leveler rolls, guide rolls, squeeze rolls,
mandrels, zinc bath rollers and skin pass rollers were a few of the components that
require surface treatment to enhance the component life and performance.

Present Marketing Strategy

Following successful entry into the wire drawing industry, primarily by word of
mouth and B2B marketing, Sai Coating has achieved about 15% share of the
market. The wire drawing industry dealt with consumer durables in the housing and
real estate space.
Nageshwar Rao felt that he had not been able to well articulate the value of his
product to the customer and that he needed to develop a robust pricing strategy that
was built on his understanding the customer value, on his being able to establish the
value to the customer and being able to extract the value for his firm. To increase
awareness of the potential applications of the technology and the time required to
demonstrate the value, the firm had been following primarily a cost-plus pricing
policy. ARCI had developed the costing framework, applying which estimates of
the cost were being made. Margins were then added to the base cost. Rao estimated
that his full cost of making a D Gun if he were to make and sell 10 units in a year
would be about Rs. 12 lakhs. At 50 units a year, the unit full cost would come
down to Rs. 10 lakhs.

Pricing strategy
There were two major factors preventing the attainment of desired growth rates for
the DSC technology. The first was the resistance to adoption encountered in the
marketplace due to the bureaucratic inertia encountered in the target segment
accentuated especially so far as public sector firms were concerned. The second
was the nature of the customer. While segments by industry were a good way to
understand the market potential, Nagehswar Rao was discovering that the thinking
of the customer varied depending on the location and background of the manager.
For SMEs in the private sector that operated from non-metro locations, often there
were no established internal procedures within the potential customer for
purchasing items like a DSC Gun that might be bought once every 5-7 years.
Getting to know the person appeared to be a criteria. The concept of a budget
was also less certain in one of the three D-Guns that he had sold, he had been told
that there was no budget but when he managed to get higher up the hierarchy, a
budget was created.
Competition: There were other substitute technologies that were available. DSC
was positioned between HVOF and Plasma technologies in terms of the
performance and pricing. Plasma charges around 25% less than the DSC does,
while HVOF charges 25-30% more than DSC. In terms of performance (please
refer to Exhibit 2) DSC appears to provide better value than the other technologies.
Value to Customer: The market was mostly unaware that the DSC technology
exists and hence was not aware of the potential benefits that they can obtain from
using it. Nageshwar Rao estimated that in the wire drawing segment and turbine
blades the benefits of using DSC were as follows

Life enhancement by 3 times of the normal wear life of a component

Reduction in down time. Firms that used alternative technologies needed to
replace the wires every 4 months because of wear and tear. There was a
machine down time of an average of 8 hours (machines were stopped wires
were taken down, new wires were put on the pulleys and tested). A DSC coated
wire lasted 8 to 10 months. Machines normally ran 6 days a week for 8 hours a
day.
Savings on using a cheaper base material. The material used for the wires can
be 10-20% cheaper (of lower strength) because DSC coating enhances the
strength of the wire by an amount that allows use of a relatively lower strength
wire.
Reduction in the wastage caused by rejection of components manufactured.
Rejection rates of coated turbines falls from 12 per 1000 to 1 per 1000. A
typical turbine blade for a thermal power generation equipment has about 150
sq feet of surface and increases the life of the of the turbine blade from 2 years
to 4 years. One turbine blade for a small generator (60MW) costs more than Rs.

50,000. A larger turbine blade (for a 500MW plant) may cost upto Rs. 3 lakhs
per blade and its life increases from 2 to 3 years.
Conclusion
Nageshwar Rao needed to find a pricing approach and level that would enable him to
point out the value of the product to the customer and to price the product accordingly.
He had the feeling that he was leaving money on the table. In particular, we wanted to
know the degree to which, if at all, he could raise prices in the wire drawing, textile
industry (guide pulleys), spindles and the turbine blade segment.