The Hindu Business Line : Revathi Equipment up on talk of Atlas Copco compensation

THE stock of the Coimbatore-based engineering company Revathi Equipment has been moving up on sustained buying interest on the bourses. The counter has appreciated by 17 per cent from aroundRs 205 on June 17 to its current level of Rs 240 on the BSE. The stock is not listed on the NSE.

The spurt in interest in the counter is on account of talk that the company is close to resolving its long pending dispute with Atlas Copco. The buzz on the street is that Atlas Copco has agreed to pay Revathi a sum of Rs 23 crore as compensation.

Atlas Copco India Ltd had sold its drilling business to Revathi Equipment for around Rs 9 crore, almost two years ago. The former had then entered into a non-compete agreement with Revathi for a period of five years. However in the interim, the parent company, Atlas Copco AB-Sweden, acquired worldwide, the drilling business of Ingersoll-Rand (US).

Given the likelihood that all of Ingersoll-Rand business in India would come to Atlas Copco, it was perceived as violation of the non-compete agreement by Revathi, prompting the latter to seek a stay in Court.

As per the market grapevine, the two parties have signed an agreement and the non-compete agreement will soon be nullified and the stay vacated. Atlas Copco has reportedly agreed to pay Revathi Equipment the sum of Rs 23 crore as compensation.

Atlas Copco manufactures screw, reciprocating and centrifugal compressors and is market leader in screw compressors.

When contacted, Mr. Abhishek Dalmia, CEO of the Renaissance Group and Executive Chairman of Revathi Equipment, told Business Line that the said issue is under discussion. "We are talking about it and expect it to be resolved shortly," he added.

Analysts maintain that if this were to come through, not only would Revathi get back Rs 9 crore, which it had expended on the purchase of the drilling business from Atlas Copco, but would have an additional standalone profit of Rs 14 crore.

"This sum could be used in development of new products that the company is planning in the infrastructure arena," an analyst tracking the company said.

Revathi Equipment registered a turnover of Rs 48 crore in March 2004, reporting a profit of Rs 11.5 crore. There is expectation that by 2005 the company would be doing a turnover of Rs 65 crore and reporting earnings of almost Rs 55. Revathi Equipment manufactures water well rigs, blast hole rigs, pneumatic equipment and accessories and allied products.

The stock ended the day at Rs 239.90, up 5.89 per cent with around 1,9695 shares traded on the BSE.