Mumbai: Power equipment maker Emco Ltd’s recent sale of its unit Emco Energy does not signal a shift from the generation space, instead it has lined up larger plans for the segment, a top company official said.
“On the generation side, what I see is we will be able to develop projects that we are working on,” said chairman and managing director Rajesh Jain on Friday.
“I think we should be able to get at least two projects at a reasonable level where good visibility will be there three years down the line.”
Emco Energy, which was in the process of setting up a 300 MW power generation project at Warora in Maharashtra, was sold in July to GMR Energy, a unit of GMR Infrastructure for an undisclosed sum.
“We have sold the project but we have not sold the business...this is like taking one step back for taking a quantum leap forward,” Jain said.
The decision was taken by the board to unlock value and to help execute bigger power projects with the money, he added.
Jain declined to disclose the sale amount citing a non-disclosure pact with the buyer, but said the figures would be disclosed in the next quarterly results.
The company has already in place a pact with Chhattisgarh government to set up a 600 MW power plant, and it is looking to set up another in one of the states in eastern India.
The transmission and distribution maker is eyeing a revenue growth of 18% to 20% in 2009-10, on the back of an expected 45-50% order book growth in its products and projects business, Jain said.
“Lot of orders are there in the pipeline for transmission and substations, which I believe would now pick up traction.”
The company’s Ebidta (earnings before interest, depreciation, taxes and amortization) margin is likely to be maintained at about 13%, with higher margin in its products business offsetting the slightly lower project margins.
The company, which makes up to 400 kV class transformers at Thane and Jalgaon in Maharashtra, is assessing the feasibility of making 765 kV class transformers, Jain said.
It is also evaluating the possibility of further scaling up its transmission lines business capacity, which was raised from 18,000 MT to 45,000 MT a year ago, he added.
“That is an extension of an existing business, nothing new. In three months from today we should be able to take up a final call,” on whether and how to scale up transformers and transmission lines businesses, the official said.
Switchgear making is another allied segment where it is considering a foray, and for the last 6-8 months it has been talking to a potential overseas partner that does not have a presence in the domestic market, Jain said.
“Aim is to get the technology -- because not only switchgear has a good market but, for our substations business it also has a very strategic importance.”
Emco had acquired a 37.5% stake in an Indonesian coal mine in 2007, and hopes to sell the coal mostly to Indian customers in the near future, he said.
It is also working at offering power management solutions and smart metering, and has also invested in a solar business in the US that has a manufacturing facility in Germany.
“Our bucket is full with five-six thoughts, some of them are already in execution and some of them are in evaluation stage.”
The company does not plan to raise funds at this stage. “Money is not even on the thinking radar. It’s not that our growth or expansion is constrained because of the money.”