The Hindu Business Line : Crompton Greaves scales down capital spending

Mumbai, Dec. 22 Power equipment major Crompton Greaves Ltd had decided to scale down its capex for the fiscal to Rs 150 crore from the earlier target of Rs 220 crore, due to market conditions, said Mr S.M. Trehan, Managing Director of the company.

Mr Trehan told Business Line that till date, the company has spent Rs 130 crore but given the volatility in the market, by March 2009, it will only spend another Rs 20 crore.

“If conditions do not deteriorate after March 2009, then we will spend the rest of the money next year. For the fiscal 2009-10, the company will continue to have a capex in the range of Rs 200 crore,” Mr Trehan said.

He said notwithstanding the downturn, the company is bullish about the power equipment sector. Since May 2005, the company has acquired five new companies and it continues to look at mid-size companies in the US and European Union having sales revenue between €100 and 300 million.

“We want to acquire companies which are in line with our present business. We are not considering anything new and want to remain confined to the traditional businesses in power sector. Radically new opportunities would be considered by other Avantha group companies,” Mr Trehan said.

Order book position

Crompton’s total order book position for year stood at Rs 7,400 crore with the international business contributing Rs 4,400 crore and the rest from domestic market.

Mr Trehan said the order book position will carry the company for the next 12 months. Domestically, the slump will not last beyond 12 months; however, overseas, it may last longer. As power being a crucial need for the country, the sector will continue to attract investments, he said.

He said the fastest growing business in the company is equipment for transmission and distribution sector, which is increasing at 25 per cent. Industrial equipment supply is growing by 18 per cent and consumer electrical at 15 to 18 per cent. “We will be able to maintain these ratios till March 31, 2009. Likely growth in turnover for the year would be 18 to 20 per cent, which is similar to the half year picture,” Mr Trehan said.

Cash surplus

Mr Trehan said the company has liquid cash of around Rs 200 crore and has huge potential to borrow from lenders. Based on the balance sheet, the company can borrow up to Rs 2,000 crore but it has desisted from doing so. The company remains debt free and would continue in that manner, he said.

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