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Crompton’s acquisition to enhance power biz

Crompton’s acquisition to enhance power biz
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First Published: Tue, Mar 30 2010. 11 33 PM IST

Updated: Tue, Mar 30 2010. 11 33 PM IST
The acquisition of UK-based Power Technology Solutions Group Inc., or PTS, by Crompton Greaves Ltd is another significant step in its efforts to increase its presence in the expanding power sector. PTS has been valued at £30 million, or around Rs202 crore.
PTS is a high-voltage electrical engineering company catering to regional electricity companies and will give Crompton an edge in competing for power projects. This will be an extension of Crompton’s main business of making and supplying power transmission and distribution (T&D) equipment, which contributes nearly 70% of its annual revenue of around Rs9,000 crore.
In fact, the PTS acquisition is a neat fit in Crompton’s trajectory of inorganic growth. In 2005 and 2006, Crompton had acquired two loss-making European companies, Pauwels Group of Belgium and Hungary-based Ganz Transelektro Villamossagi Zrt, which helped it double its revenue and put it on the global map as a T&D player.
Graphic: Yogesh Kumar/Mint
At present, around 45% of Crompton’s consolidated revenue comes from developed markets through these subsidiaries. Crompton’s profile, too, has since changed to include high-voltage transformers and switchgear.
PTS will enable Crompton to participate in turnkey engineering, procurement and construction (EPC) contracts. “While the margins in the business may not be higher than that of its core power equipment business, the projects space is a high volume game,” said Dhirendra Tiwari, director-research at Ambit Capital Research.
In mid-2007, Crompton also acquired Microsol Holdings Ltd, an Irish maker of automation systems for sub-stations. All this makes Crompton a strong play on the global T&D segment.
According to Tiwari, its domestic business is also expected to benefit owing to indigenization efforts in the high-voltage transformers (400kV) segment, which will improve its competitive edge against multinationals such as ABB Ltd, Areva SA and Siemens AG. The outlook on growth for Crompton looks decent as the transformer market alone is expected to grow at around 15% per annum over the next three years.
Crompton’s order book of Rs6,000 crore is mainly in the power business. Any breakthrough in the projects space by virtue of PTS’ expertise would further enhance its prospects.
Write to us at marktomarket@livemint.com
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First Published: Tue, Mar 30 2010. 11 33 PM IST