Elecon Engineering, the largest manufacturer of industrial gears in the country, is re-entering the promising renewable energy business.
Setting up a facility in Jamnagar
MUMBAI: After a sabbatical of six years from the wind energy sector, Elecon Engineering, the largest manufacturer of industrial gears in the country, is re-entering the promising renewable energy business.
Ever on the lookout for diversifying its customer base, the company has also made inroads into the defence sector by winning orders for one pair of giant gear boxes (weighing 85 tonnes) for the country’s first indigenous naval aircraft carrier to be built by Kochi Shipyard. That order alone is worth Rs 39 crore.
In the works is a wind farm in Jamnagar, which at full capacity could generate about 40 mw of electricity.
In an interview to DNA Money, Hemendra Shah, CFO of Elecon, said the company will begin the phased expansion of wind turbines manufacturing by April 2008. “There is momentum in the sector. We find the prospects encouraging as the industry scenario is replete with instances of order books of wind turbine gear boxes stretching to over a year,” he said.
Elecon expects to manufacture and sell at least 20-25 windmills in the current fiscal, giving it revenues of around Rs 50-60 crore, Shah said.
In the next fiscal year, the company expects revenues from windmills to rise to Rs 150 crore. It is also manufacturing gear boxes for the windmills. Elecon has a collaboration with Belgium-based Turbo Wind for making gear boxes. It will outsource the other critical equipment for wind turbine manufacture, including rotor blades and nacelle, Shah added.
Elecon’s strategy to diversify its customer base is with an eye to even out the cyclical nature of its business. But those tracking the company are less conservative and more effusive. “The best part of the Elecon story is only just the beginning. And MHE, Transmission Equipment, and the company’s new initiatives, such as the Windmill gearbox business, will all be the crucial legs of that story,” First Global India Research said.
As long as investments in the power, cement, mining sectors pour in, Elecon will do well. The company is the undisputed leader in the manufacture of industrial gears in the country, and also has a significant stake in the material handling equipment segment, which is witnessing heightened activity because of huge investments in power, mining and other infrastructure sectors.
While the times are good, with order book position overflowing to over 18 months, Elecon’s focus has been to stabilise its future and ensure a steady growth.
Shah says the company has been trying different things. Recently, it lost out in a bid to acquire Alcock-Ashdown (Gujarat) Ltd, a ship building business owned by the Gujarat state government undertaking. “We were the highest bidders,” says Shah. The state government apparently changed the goal posts after the bids were called ascribing that the bids were below reserve price. The acquisition would have helped as the ship-building firm has an order book of over Rs 1,200 crore.
Elecon’s industrial gear boxes now cater to larger theme, with a diversified clientele. Sugar, sponge-iron and the defence sector are the new faces among the clientele list.
It has so far procured orders to the tune of Rs 912 crore, in the material handling equipment sector. NTPC’s Dadri plant alone has placed an order of 227 crore.
The company expects to clock a revenue of over Rs 1,000 crore in 2007/08 as compared to Rs 723 crore last year.
Its outstanding order book at the beginning of December stood at Rs 1127 crore while it is expecting fresh orders worth Rs 2,000 crore by the end of the year. The gear division contributes around 40% to revenues but has higher net margins of around 22 %. With 95% of the production being done in-house it consumes a substantial share of the company’s resources.
The company will also profit from urbanisation and the fact that cities are growing vertically. The company has a technical collaboration with Haisung Industrial systems of South Korea to gain technology for designing and manufacturing of high speed and high capacity gearboxes to be used in lift and elevators. It also has a technical collaboration with RenkAG of germany to make vertical roller mill gearbox for use in cement and coal mills.
j_satish@dnaindia.net
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