Elgi Equipments Ltd (EEL), a major player in the air compressors and automotive equipments segments, despite registering a marginal fall in net income from operations in the third quarter of the current FY compared to the same period in the previous fiscal, is optimistic of rapid growth once there is an economic turnaround.

The company, bolstered by its acquisitions in Italy and the US, has seen a 10 per cent growth in its compressor business, though the organic growth was subdued by margin pressures.

In the third quarter of 2012-13, Coimbatore-based EEL on a standalone basis earned a net income of Rs 194.81 crore as against Rs 203.14 crore in the same period in the previous fiscal.

Though the cost of materials consumed was less at Rs 87.36 crore ( Rs 97.29 crore), other expenses were higher at Rs 34.90 crore (Rs 29.49 crore). The net profit was down to Rs 13.81 crore from Rs 19.89 crore in the corresponding quarter in the previous year. The basic EPS fell to Re 0.87 (share face value Re 1) as against Rs 1.26 in the same period in 2011-12.

Segment-wise on a consolidated basis, the compressor business witnessed a jump in sales to Rs 245.59 crore (Rs 212.91 crore) while automotive equipment sales gained at Rs 33.48 crore (Rs 31.34 crore).

In a release, EEL said on a consolidated basis, sales registered a 14 per cent jump to Rs 287 crore from Rs 252 crore in the corresponding quarter of the previous year. The compressor business was up by 10 per cent due mainly to its overseas acquisitions. However, it said “sluggish and uncertain economic conditions” in the market impacted organic growth, with margins coming under increasing pressure.

During the quarter EEL bought 100 per cent stake in Pattons Inc, USA, along with its wholly-owned subsidiary Pattons Medical LLC with a presence in five South-Eastern States and a turnover of $40 million. The acquisition gave the company a well spread out distribution reach which could be expanded to other regions in the US.

EEL said its automotive division recorded 7 per cent sales growth in the quarter ending December 31, 2012, beating the industry trend that suffered a negative growth of 5 per cent. Margins were under sustained pressure, even as product demand was subdued.

Referring to the last quarter of the current fiscal, EEL said because of persisting market uncertainties, it expects to close the year with ‘marginal organic growth’. But it would continue to focus on select international markets so that when the economic recovery sets in, it could capitalise on it and ‘grow rapidly’. It was confident that the acquisitions it had made (it had acquired Rotair SpA Italy in August last year and subsequnetly the US company) and the augmented manpower resources would ‘yield results in the ensuing financial year’.

(This article was published on January 26, 2013)
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