The consumer durable sector is replete with opportunities mainly on the back of soaring demand. What is the outlook for the sector going forward?
MM Miyajiwala, Executive VP, Finance of Voltas informs that the electromechanical segment order book stands at Rs 2,000 crore.
He further adds that Rs 1,300 crore of electromechanical segment order book is from the overseas. According to him, the sales from unitary business is up 35%. He also says that they are facing margin pressure.
Excerpts from CNBC - TV18's exclusive interview with MM Miyajiwala:
Can you chart out for the next few quarters how your order book stands and how it would break up between both segments?
At the end of last quarter or last month, our order book was something like Rs 2000 crore in our electromechanical business of which about Rs 1300 crore comes from international projects and the balance comes from domestic electromechanical, which is primarily HVAC (heating ventilation A/C) business.
As far as our second segment is concerned, which is engineering services and projects, we don't really track our order books because our order book really belongs to our customers.
But in that segment we have our forklift trucks business, the material handling business where we manufacture forklifts, and that business is shaping up very well. We have nearly tripled our production levels in the last 15 months. So all those places are doing well.
In the unitary products segment there is no order book because we stock and sell. We manufacture room air conditioners and split air conditioners, which are manufactured in our joint venture with Fedders.
That business also has been doing well in the peak summer season. Our sales have been something like 35% over the previous year although that business is facing pressures of input cost, but otherwise it is doing well.
Have the pressures of input cost reduced a bit now because of the fall in metal prices or will it take some time to really start helping you?
It will take a couple of months for us to really feel the effect of the softening up of input prices.
Do you see the softening continuing?
The prices won't go up the way they have in the past, but too much of softening
How is business shaping up generally? Any concerns on demand slackening?
No, I don't think there is any concern on demand slackening. Infact we are looking forward with a lot of interest in the development of infrastructure in India. We have been doing a lot of electromechanical projects outside the country and in India in that area we have been doing more HVAC jobs.
We see that more electromechanical business should be coming in particularly with the large expansions on airports taking place.
We are talking about new airports in Hyderabad, where we have already bagged the order. Now we are looking forward to Mumbai and Delhi, which would be much larger than Hyderabad, and thereafter Nagpur, Kolkata, Chennai. We are very bullish on the business from India in the infrastructure areas and particularly in airports.
Given your current order book, what do you think you might finish the year with in terms of sales?
Normally as far as domestic business is concerned the cycle time is between three months to 15-18 months, and as far as international business is concerned, the average time taken for completion of a project is about two years. So you can take a guess what the turnover will be.
Your Electro-mechanical Projects & Services (EMPS) division grew just by about 15% last year because we largely think you couldn't really account for some of the orders because some of them were in the initial stages. Will it be different this quarter?
No, not in this quarter because a lot of engineering and mobilization work is still going on for the last two projects that we have bagged in Bahrain and Dubai. I think the upswing should start from the third quarter.
Operating margins in your Engineering Agency Services (EAS) division were down by about 45% YoY, do you think you can reverse the trend?
I think margins will move back in the third and fourth quarter. Once again we were incurring a lot of costs in the first quarter, which will also continue in the second quarter. So the results and the billing from this will come in the third and fourth quarter.
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