Hyderabad: Engineering firm Hindustan Dorr-Oliver Ltd (HDO), a listed subsidiary of Hyderabad-based IVRCL Infrastructures and Projects Ltd, is eyeing more acquisitions in Europe, vice-chairman E. Sudhir Reddy said.
HDO had in March acquired Sheffield, UK-based engineering firm DavyMarkham Ltd for £9.5 million (Rs64.5 core). It is now looking for three or four acquisitions of $3-5 million each.
“We will be looking at some proprietary engineering firms specializing in (the) manufacture of components for nuclear, defense and mining sectors in and around Sheffield,” Reddy said, without specifying a time for the purchases.
HDO wants to consolidate its manufacturing base in and around Sheffield—which Reddy described as a hub of nuclear development activity—to be able to cater to international markets. DavyMarkham, he said, has expertise in nuclear waste treatment and transportation as well as a strong presence in mining equipment. HDO would bid for large nuclear and mining projects in India and abroad by strengthening its manufacturing division, which now contributes to just 10% of its revenue. The balance comes from its engineering services division.
“The strategy to focus on manufacturing is to extend its engineering capabilities and generate a relatively stable source of cash flow,” Sanjeev Zarbade, an analyst with Kotak Securities Ltd, wrote in a 4 March report.
HDO is setting up a greenfield manufacturing plant at Dahej, Gujarat, expected to be completed by next March. On 19 March, the company’s board had approved a proposal to raise $50 million to fund the proposed acquisitions and to bid for large projects. HDO has an order book size of Rs1,500 crore.
An analyst with a Mumbai-based brokerage said HDO’s proposed acquisitions are unlikely to improve its revenue or profit as they are small in size.
“If the company is acquiring them for new technologies, then it is okay,” said the analyst, asking not to be named. “...The company should look at acquisitions in the existing areas of its operations such as water treatment and liquid solid separation, which are still largely untapped in the domestic market and offer huge business opportunity.”
HDO’s revenue had increased 68.57% to Rs513.33 crore in 2008-09, and its net profit rose 33.23% to Rs30.15 crore.
On Thursday, HDO shares rose slightly more than 2% to end at Rs123.55 each on the Bombay Stock Exchange, while the Sensex shed 1.42% to close at 17,714.40 points.