Mumbai: Air-conditioning and cooling products maker Voltas Ltd, part of the diversified Tata Group, is going slow in bidding for electromechanical projects (MEP) in the Middle East as rising competition in the region squeezes profit margins, a top official told Reuters.
“Cash is the most important then comes profits then comes turnover...,” M.M. Miyajiwala, chief financial officer, said late on Wednesday.
“If it means going slow, so be it. But we won’t pitch a zero margin (projects) just because somebody else is desperate to get there.”
The firm’s overseas operations, spread over the Middle-East, Africa, Asia, Australia, New-Zealand and the CIS countries contribute to over 41% of the total revenues.
Voltas, which booked Rs 400 crore of overseas orders in the first quarter, does not expect international order inflow to be significantly impacted by its cautious approach but does anticipate pressure on margins going forward.
“The challenge is going to be that the margins are not going to be what they used to be in the past and that has to be created by internal efficiencies and negotiations,” Miyajiwala said.
The firm’s total order book comprising domestic and overseas operations stood at Rs 5000 crore as of 30 June.
While this year is likely to see a consolidation in the electromechanical segment in the domestic market, he expects robust growth from the business from the next fiscal due to increased government spending on infrastructure.
Voltas may look at inorganic growth if needed in the domestic water management and treatment business.
“Water management is a relatively small business for us but I must say that it is growing very fast..we won’t rule out any inorganic growth in this space,” he added.
Voltas plans to spend Rs 500-600 million in FY11 as capital expenditure, Miyajiwala had said earlier.
The company expects 30-35% growth in turnover in FY12, he added, but did not provide a revenue projection for the current financial year.
Unitary Cooling Products
The cooling products maker also said it expects volumes in its unitary cooling business to grow at 30-35% year-on-year, he added.
“Running cost of airconditioners has come down very drastically, disposable incomes have grown, power availability is slowly improving and with expectations of several nuclear power plants on stream this business will see robust growth,” he said.
Revenues from the unitary cooling segment rose 41% in in the June quarter of the current fiscal from the same period a year ago.
At 12.45 p.m., shares of the firm were up 0.27% at Rs 223 in a weak Mumbai market.