The Hindu Business Line : Voltas bets big on electromechanical biz

ACCORDING to Mr M.M. Miyajiwala, Vice-President (Finance) at Voltas, the electromechanical business is driving the growth for the company. He also agrees that margins have increased due to the international projects where revenues have increased sharply.

Excerpts from CNBC-TV18's exclusive interview with Mr Miyajiwala:

Your operating margins have gone up to 6.9 per cent. What led to this expansion and is it sustainable?

Most of our businesses have done very well. Electromechanical business, both in India and abroad, is doing well. The Indian economy is booming and so is West Asia with the crude prices. Our margins have mainly improved in the international markets, where we have several projects, which are profitable.

In fact, our turnover from the international business has gone up from Rs 175 crore to Rs 487 crore in the first nine months of the current year, while our domestic turnover has gone up from Rs 770 crore to Rs 890 crore, but there the profit margins have jumped substantially. Our engineering services, material handling, textile machinery division and the mining and construction divisions all have done well. In the domestic air conditioning business, our order book has jumped by 50 per cent.

Putting all your segments together where would your order book stand?

Our order book in the electromechanical sector is at Rs 1,500 crore and in the engineering service businesses, where we reckon only our commission earned as revenue, the order book has gone up by about nearly 100 per cent from Rs 82 crore to Rs 156 crore. For the other businesses, the order book is not very relevant.

What is the period over which this order book gets executed?

As far as domestic air conditioning is concerned, the average time for completing this would be about one year and in the case of international business, it would be about two years. Our pipeline of orders is looking very good and hopefully by the end of March our order book would be even better than what it is today.

On your export performance, what kind of orders do you expect from West Asia and by the time the next fiscal year is out, do you expect the export to domestic proportion of your revenue to change significantly? What kind of impact would it have on your margins?

At this point in time, the export projects contribute 35 per cent of our turnover and domestic contributes 65 per cent and I think this ratio should continue till the end of the year.

But in the next year, I think domestic will overtake with the speed at which it grows and in the first half, I expect domestic to contribute much more than international.

Would that depress your margins?

No.