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

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.

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