Prayasvin B Patel, CMD-Elecon Engineering Company

Elecon has been earning robust EBITDA margins in the range of 14-16 per cent in last couple of years. The company was able to increase the margins on the back of improved operational efficien¬cies. There has been cost rationalisation in all the departments, which leads to a decrease in overall expenses. Diversification to newer areas also has added fuel to the growth. Elecon has expanded its activities to new areas like manufacturing of wind mill gear boxes for 1 MW to 2 MW. Thus Elecon is poised to enjoy first mover advantage leading to sustained growth, higher margin and revenues. 

Cost management has helped us to improve our margins. There has been cost rationalisation in all the departments, which leads to a decrease in overall expenses. The material management exer¬cise has yielded better EBIDTA margins from last couple of years. Finally economies of scale have enabled us for better pricing. The Company has expanded capacity in the manufacturing plants in last couple of years for catering to larger demand. Increasing scale of business activity has led to lowering of per unit fixed cost thus leading to economies of scale. 

We have robust order booking and live inquires over the years and due to our competitive manpow¬er cost and high level of technology, we are comfortably able to maintain growth over the years. 

As over the past few years, the demands for Material Handling Equipments have picked up on ac¬count of boom in core and industrial sectors. Sectors like power, port, steel, Fertilizers, cement, min¬ing etc. are experiencing a speedy growth leading to a huge demand for these equipments which is one of the major reasons for consistent growth over the years. While gear division over the past years have witnessed robust growth driven by industrial capex as gears find applications across all industries such as power, steel, cement, sugar etc. 

The Benzler-Radicon group is headquartered in the UK and based out of primary sites in the UK & Sweden, thereby providing an ideal gateway to the European market. In addition there is a strong presence in the US through David Brown Group subsidiary, Cone Drive. The Group also sells into other markets including Asia and North America. This acquisition therefore gives Elecon a platform to grow in exports in a big way all around the world. 

With this acquisition we will achieve higher volume with Radicon range of products and Benzlers- Radicon Gears will provide the platform for Elecon products to have better presence in the market and the brand name will improve penetration in the markets like North America and South America. Presently, R&D and new design development capability in geared motor is not available with Elecon so acquisition will give edge to the Elecon. This will also bring advan¬tages of: (a) Economies of scale in the manufacturing process and (b) Reduction in cost across the supply chain. 

The order booking (new orders) received till 28th February, 2011 in the FY 2010-11 are Rs. 1,565 Crores. In the MHE segment the order book is Rs 1,005 crore and for Gear division it is Rs 560 crore. 

Elecon had done a capital expenditure of Rs 128 crore for FY 2008- 09 and Rs 95 crore for FY 2009-10. During the nine months of FY 2010-11 Rs 38 crore has been capitalized as Fixed Assets and we may likely to end up the year by around Rs 55 to Rs 60 crore total capitalization for the FY 2010-11. 

We have done forward integration by setting up Wind Mill Gear Box Facility with an investment around Rs 90 to 100 crore. 

Estimated turnover for the FY 10-11 is Rs. 1,150 to 1,200 crore. (MHE: Rs 650 to 675 crore and gear: Rs 500 to 525 crore) and esti¬mated turnover for the FY 11-12 is Rs 1,400 crore (For MHE target is Rs 820 crore and for Gear division our target is Rs 580 crore). 

Elecon Engineering wants to penetrate extensively in the Wind Mill Gear Boxes, Sugar Planetary Gear Boxes and Marine Gear boxes business. Entering in the business of manufacturing of Wind Mill Gear Boxes and targeting to become Major player in 1-2 MW Segment is in our priority list. We have entered into an agreement with CKIT Convey¬or Engineers, Johannesburg, South Africa for Pipe Conveyor Technolo¬gy, Trough Belt Conveyor Technology and Technology for Idler Frames. We are also Exploring following new segments for higher growth : De¬fense – Navy; High speed gears; Gears for Plastic Industry. Moreover the company, for the first time, is developing high speed conveyor with consultancy support from M/s. Conveyor Dynamics Inc. USA.