July 20, 2008

Elecon scouting for windmill gear units overseas

DNA Money reported that Gujarat based Elecon Engineering Company Limited is scouting for inorganic growth opportunities in the windmill gearbox manufacturing segment overseas. It is looking for an acquisition either in the US or Europe in the range of INR 300 to INR 400 crore for the purpose.

According to a company source, Elecon has also initiated talks with firms in ship fabrication for buyouts. Further, it plans to increase its exposure to the steel sector by bidding for modernization projects.

Mr Hemendra Shah CFO of Elecon Engineering said that "We are analyzing different options for growth, which includes acquisition and our investment bankers are working on the same." He added that however, everything is at preliminary stages and it will inform the stock exchanges as and when any arrangement is finalized and approved by the board.

Elecon would invest nearly INR 200 crore in the next 2 years to expand capacities, particularly in windmill gearbox manufacturing. Out of INR 200 crore, it would invest about INR 100 crore in a windmill gearbox manufacturing facility, which will be ready by June 2008.

Elecon supplies equipment to core sectors such as steel, fertilizers, cement, coal, lignite and iron ore mines, power stations and port mechanization. Around 70% of Elecon’s revenue comes from the power sector, followed by steel, mining, cement and fertilizers. It expects revenues of around INR 1,400 crore in 2007-08 as compared with INR 723 crore in 2006-07. At present, Elecon’s outstanding order book is at INR 1,091 crore, INR 876 crore from the MHE segment and INR 216 crore from the transmission segment. With this, growth in the outstanding order book for MHE and transmission segments stands at 73% YoY and 14% YoY, respectively.