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Business News/ Companies / Greaves Cotton in talks to sell assets at Tamil Nadu facility
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Greaves Cotton in talks to sell assets at Tamil Nadu facility

The sale will mark Greaves Cotton's exit from the construction equipment manufacturing business

The sale comes at a time when the industry is grappling with a sharp drop in demand led by a slowdown in the infrastructure sector in the country. Photo: MintPremium
The sale comes at a time when the industry is grappling with a sharp drop in demand led by a slowdown in the infrastructure sector in the country. Photo: Mint

Mumbai: Greaves Cotton Ltd, an engine and infrastructure equipment maker, is in talks with multiple entities to sell its construction equipment manufacturing plants.

It will sell all three assets at its Gummidipoondi, Tamil Nadu facility, Narayan Barasia, chief financial officer of Greaves Cotton, said in a telephone interview on Tuesday.

On Monday, the company had said that it has permanently shut manufacturing at its construction equipment plant at Gummidipoondi because it had become unviable and to avoid incurring further losses.

The sale will mark Greaves Cotton’s exit from the construction equipment manufacturing business and comes at a time when the industry is grappling with a sharp drop in demand led by a slowdown in the infrastructure sector in the country. Stalled projects, land acquisition challenges and delays in environmental clearances for projects have affected the construction equipment industry.

The dismal state of the construction equipment manufacturers in the country will lead to low valuations for Greaves Cotton’s facilities, experts say.

“The plants will not get a very high valuation since the industry currently has a huge oversupply, and Greaves Cotton does not have a very high market share. So they will be sold at a steep discount," said an analyst with a domestic brokerage. He requested anonymity since he is not authorized to speak to reporters.

An independent consultant familiar with the negotiations said that Greaves Cotton was in talks with a couple of domestic players but the discussions had failed due to differences on pricing. Now, the company is also talking to international players, he added requesting anonymity since he is not authorized to talk to the media. Greaves Cotton makes engines, farm equipments, and auxiliary power products. Its infrastructure business makes concrete and construction equipment. For the quarter ended 30 June, the company reported a 2.4% increase in revenue to 422.5 crore. Its profit declined 9.5% to 28.7 crore because of losses in its infrastructure segment. Revenue from the infrastructure segment fell 23% from a year ago. A 7 August research report from Nirmal Bang Securities Pvt. Ltd, said that the construction and infrastructure equipment division of the firm continues to remain an underperformer in line with overall industry trends.

To be sure, the government’s focus on reviving stalled projects in the infrastructure sector has renewed hope for the construction equipment industry.

In 2015, India is expected to sell around 59,600 units of construction equipment, according to a July report by consulting firm Roland Berger. India has an 8% share of the global construction equipment market and has the potential to grow at around an annual average pace of 12% from 2014 to reach $4 billion ( 24,383 crore) by 2017, the report said.

Greaves Cotton’s construction equipment is mainly used for construction of roads, bridges, buildings, ready mix concrete applications among others. It also caters to the service and spare parts requirements.

It competes with Escorts Ltd, BEML Ltd, Larsen and Toubro Ltd, Action Construction Equipment Ltd and international manufacturers such as J.C. Bamford Excavators Ltd (JCB), Komatsu Ltd, Caterpillar Inc., and Sany Heavy Industry Co. Ltd among others.

madhura.k@livemint.com

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Published: 18 Sep 2014, 12:38 AM IST
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