Elecon Engineering is on the lookout for an acquisition in the material handling equipment (MHE) and gearbox segments in the European and US markets.
Vijay Ganeshan
MUMBAI: Gujarat-based Elecon Engineering is on the lookout for an acquisition in the material handling equipment (MHE) and gearbox segments in the European and US markets. It is also in talks for setting up a joint venture in the Far East for making gearboxes and expects a deal this fiscal.
“The companies would be similar (to) or smaller than ours,” Prayasvin B Patel, chairman and managing director of Elecon Engineering, told DNA Money on the likely acquisition.
Elecon is also exploring the option of setting up a manufacturing base in one the special economic zones (SEZs) coming up in Gujarat and has already short-listed a few with an aim to enhance its exports, which currently stand at 12% of its total sales.
“We are identifying SEZs which have good connectivity to ports for our kind of business. Although the idea is at the planning stage, we are looking at how best it can be feasible and are working on it,” said Patel.
The company wants to push up exports to about 30% of its total sales in the long run, he added. It currently exports to South East Asia, Australia, Middle East and Africa.
Also, to enhance capacities at its current facility at Anand, Elecon has decided on a capital expenditure of Rs 60-80 crore this fiscal.
The company recently bagged a contract for supplying 2 propulsion gearboxes worth Rs 50 crore for India’s first indigenous aircraft carrier. For this project, it has entered into a technical collaboration with France-based Renk AG, which would supply the engineering components.
“These gearboxes would have a localisation content of more than 50%,” Patel said.
The company had earlier supplied gearboxes for Indian Navy’s frigates, being constructed at the Mazagon Docks. To keep up with the pace and timelines of such defence orders, it has set up a separate unit only to manufacture the gearboxes required by Indian Navy and Coast Guard. The orders are estimated to be worth Rs 450 crore.
Asked how these expansion plans would be financed, Patel said, “All financial requirements would be met through internal accruals and bank loans.”
Elecon posted a turnover of Rs 720 crore for 2006-07, up from Rs 443 crore the previous year. It has an order book position of Rs 779 crore in MHE and gearbox segments compared with Rs 583 crore the previous fiscal.
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