Crompton Greaves Limited

Crompton Greaves one of the India’s large private sector enterprises, has diversified business model  in designing, manufacturing and marketing technologically advanced electrical products and services related to power generation, transmission and distribution, besides executing turnkey projects. The company is the single largest source for a wide variety of electrical equipments and products. With several international acquisitions, Crompton Greaves is fast emerging as a first choice global supplier for high quality electrical equipment. The company addresses all the segments of the power industry from complex industrial solutions to basic household requirements.

The company is organized into three business groups viz. Power Systems, Industrial Systems, Consumer Products. Presently, the company is offering wide range of products such as power & industrial transformers, HT circuit breakers, LT & HT motors, DC motors, traction motors, alternators/ generators, railway signalling equipments, lighting products, fans, pumps and public switching, transmission and access products. In addition to offering broad range of products, the company undertakes turnkey projects from concept to commissioning. Apart from this, CG exports its products to more than 60 countries worldwide, which includes the emerging South-East Asian and Latin American markets.

Recent Developments

Crompton Greaves Ltd just concluded an arrangement for the acquisition of 3 businesses on a slump sale basis. The first one is Traction Electronics which deals with railways as the main customer. The second one is Supervisory Control and Data Acquisition (SCADA), of which the main customers the railways, Power Grid Corporation of India, NTPC, all utilities which do the transmission and distribution of electricity. The third one is Industrial Drives which is controlling the speed of the motors for energy efficiency through a variable voltage or variable frequency drives. For the year ending is September 2010, they hope to do a sale of about Rs 115 crore. These units have an opportunity to grow compounded at an annual growth rate of 30%. In five years time this should be a major business for Crompton Greaves.

Crompton Greave’s acquisitions over last five years overseas include PTS, Pauwels, Ganz, Microsol, MSE power and Sonomatra. PTS is a UK-based electrical engineering firm with rich exposure to comprehensive electrical engineering space and diverse clientele base in the UK. Pauwels with manufacturing facilities in five locations—Belgium, Canada, the US, Ireland and Indonesia – was catering to the US and west European markets. The Hungarian switchgears maker Ganz was selling in markets like the Middle-East and Eastern Europe. Microsol Holdings in Ireland provides automated technologies for running sub-stations. France-based Sonomatra will help enhance the Company’s capabilities in the services segment of its transmission & distribution business. US-based MSE Power would help to increase its strength as a systems integrator in the engineering, procurement & construction (EPC) international business arena, particularly in the renewable energy (wind) segment. MSE recently purchased wind-turbine monitoring technology from Second Wind Systems Inc.

Prospects

All economic indicators point towards the manufacturing sector being the future driver of India’s economic growth. India is today preferred destination for sourcing various engineering goods not only due to low cost but also due to high quality of products. Strong positioning in the domestic transformer market, steady profit margins despite competitive pressures and continuing inorganic growth augur well for the company’s earnings growth.

The concern is the threat of imminent competition from global players who are already in the process of setting up manufacturing facilities in India. The market is expected to remain competition with an added element of competition from imported products. Chinese and Korean players are biggest competitors for Crompton Greaves.

While European  subsidiaries have been unable to grow in 2009-10 owing to unfavourable economic conditions in Europe and North America, return to growth  is expected from 2010-11. Recent acquisition of Power Technology Solutions (PTS) will help to expand its geographical reach! PTS is also looking to tap the opportunity in the renewable energy space, a growing market in the UK.

The scenario for the Indian Economy in general and that for the Capital Goods Industry in particular has undoubtedly improved to an extent, after the political stability in the country along with the easing liquidity situation and the offshoots of recovery in the global economy. The capital goods companies catering to the Power Sector will continue to enjoy a degree of comfort, owing to the government’s thrust on this core sector. However the sector has its own set of issues, with around 49% of the planned power projects for the Eleventh Plan already running behind schedule.

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Reference

Charged with global ambition

April 13, 2010

http://www.financialexpress.com/news/Charged-with-global-ambition/605446/

Crompton Greaves: Buy

April 4, 2010

http://www.blonnet.com/iw/2010/04/04/stories/2010040452800100.htm

Indian Capital Goods sector 4Q FY2010 outlook

April 8, 2010

http://www.stockmarketsreview.com/news/indian_capital_goods_sector_4q_fy2010_outlook_20100408%20%20_4089/

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