Elecon Engineering Co Ltd, a Gujarat-based manufacturer of material handling equipment and gearboxes, hopes to complete its restructuring by June to gain more financial flexibility for raising funds and to optimise synergies with group companies, chairman and managing director Prayasvin Patel said.
“Within the group we have almost 5-6 entities. We are contemplating the benefits of which ones can be merged. We hope to finalise the plan by March.”
The company aims to consolidate “complimentary businesses” of the group under one umbrella. This may entail the merger of Eimco Elecon India Ltd, where Elecon holds 45% stake, with itself, Patel said.
The restructuring will help reduce double taxation within the group and improve the debt-to-equity ratio that stands at 1.8 now. “We believe that Elecon is poised for growth and if we have to look at a span of 10-15 years, we need to organise and put a structure in place that is simpler than what it is right now,” Patel said.
The company sells most of its products to power, steel, cement, mining, and port sector-related companies.While the company may be optimistic about its long-term plan, immediate concerns are far too many.
Several quarters of muted order inflows have resulted in a decline in the order book, even as sales booking on existing deliveries continue to be plagued due to delays by customers.
“We could not dispatch Rs 25 crore worth of goods in October-December as some customers were not ready with the projects and also some of them had liquidity issues,” Patel said.
“Things have started improving after October. However, they demand has not caught up as I had expected it to.” The company’s topline growth was muted at 7% year-on-year in the nine months ended December at Rs 720 crore.
Profits in the period declined 2.5% to Rs 39 crore as operating margins slipped over 100 basis points to 14.6%.
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