As deals go, Voltas' foray into the Sultanate of Oman through a new joint venture has not done much for the stock on Monday, with the stock closing about 1 per cent lower at Rs 170. However, the venture may be of strategic importance to Voltas, given the importance of West Asian operations to its business.

Fears over risks to the West Asian business on increasing geopolitical tensions in the region have beaten down the stock by about 35 per cent from November 2010.

However, these worries seems somewhat overdone, as the regions in West Asia where Voltas has exposures — Saudi Arabia, Muscat and Oman — are not directly impacted by recent events, with the company having no exposure in Libya or other North African countries.

A player in the domestic air-conditioning market, Voltas has in recent years acquired a strong foothold in the electro mechanical and engineering space in the international market, with international orders making up 80 per cent of its current order book. A lion's share of the business is from UAE.

The company saw its order book shrinking with problems following the debt crisis in UAE for most part of 2009 and 2010, but revival signals seem to be emerging now. The inflow of Rs 500 crore of orders in the December quarter (mostly international orders) has taken the order book to Rs 4,700 crore by December end. That the company has inked a joint venture now with Mustafa Sultan group in the Sultanate of Oman is testimony to improving prospects in this region.

Revival signs

After six quarters of negative net inflow of orders, Voltas' order book has picked up in recent December quarter. At around Rs 4,700 crore, the order book is now 1.7 times the company's revenues from electro-mechanical project segment. With a good order pipeline, the company's move to establish a joint venture business in the Sultanate of Oman to take up electro-mechanical projects in that country may add visibility on revenues for the medium term. Voltas will hold a 65 per cent stake in the joint venture.

This joint venture follows the company's intentions of expanding into the West Asian market. With prospects of these countries linked to crude oil price, these nations may actually show some order pick-up with crude oil prices upbeat too.

Voltas' recent initiatives are making it a strong player in the electro-mechanical projects and engineering space. Voltas had also recently announced a partnership with KION group of Germany that is a market leader in industrial trucks in Europe to use latter's technology to enter into the forklift trucks and equipment market in India.

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