New Delhi: Indo Rama Synthetics (India) Ltd, India’s second-largest polyester manufacturer, is setting up wind turbines as part of a diversification strategy to compensate for its struggling core business.
The company swung to a profit for the September quarter on one-time gains but warned the next few months will be challenging.
“We will diversify our business by entering into renewable energy vertical,” chairman and managing director O.P. Lohia said on Wednesday in a statement announcing the company’s quarterly results. “We are starting with (a) 30MW wind turbine project and in (the) next two years, we will increase it up to 100MW.”
This will be done through a subsidiary, Indo Rama Renewables (Jath) Ltd, which has entered into a Rs225-crore contract with Gamesa Wind Turbines Pvt. Ltd for setting up a wind turbine project in Maharashtra.
The project is expected to start commercial operations by March, said the company in a statement.
“Going ahead, we will be investing double of what we are investing now for 30MW (around Rs500 crore) for taking up the total capacity to 100MW,” said Lohia. “The money will be funded through equity and debt.”
“The company may be hedging its bets as its core business is not doing well,” said Sudip Bandyopadhyay, managing director and chief executive, Destimoney Securities. “The overall industry is also not improving given the economic scenario.”
The company reported a profit of Rs103.59 crore for the quarter ended September, against a loss of Rs22.84 crore in the corresponding year-ago period. Net sales, though, fell to Rs734.50 crore from Rs771.71 crore.
“We are still surviving in a difficult time. It is not that our business has grown.Our business is maintained as the last year because of the slowdown. But we have made profits because of mark-to-market adjustments this quarter,” said Lohia. “Last year our mark-to-market losses stood at Rs63 crore, whereas this quarter, the company has made Rs81 crore because of the adjustments.”
Lohia said the next 3-6 months might be challenging for the company.
Indo Rama completed some key projects during the quarter that were designed to improve margins, including the addition of 11MW of power for captive consumption and the expansion of production capacity for draw texturized yarn from 64,800 tonnes to 98,145 tonnes.
Indo Rama’s stock surged 20% to end Wednesday at Rs26.55 on BSE, while the exchange’s benchmark Sensex stayed mostly unchanged at 18,610.77 points.