Voltas eyeing acquisition in electromechanical, water seg

Here is a verbatim transcript of an exclusive interview with MM Mijyajiwala on CNBC-TV18. Also watch the accompanying video.

Q: What is the main message you gave to the investors at the Enam conference? Is the situation getting better?

A: Generally, the investors have been very positive. We expect substantial growth in the years to come. So they are all looking forward to that. As far as Voltas is concerned, there were two prime questions. One is, on acquisition where we are looking at certain small size acquisitions for the water business and our electromechanical segment. There were concerns about order book. We have told them that we have enough order books available as of now even if there were no fresh bookings for the entire next year. We are well covered for the next year with growth built in. Whatever orders we book now will be more for providing visibility for the year 2011-2012. I think the investors are quite satisfied.     

Q: What about the key issues with Voltas itself? Where do you see the opportunity coming in the next few quarters? Which geographies do you think will do better?

A: In the medium to long term, we are extremely bullish on India itself because there are huge opportunities in infrastructure and other facilities. We are well poised to take advantage of those opportunities. We have also expanded a range of services that we provide in our electromechanical segment and that give us additional visibility for business. Apart from that, Middle East is also a very big opportunity.

We are now stepping into Saudi Arabia. Next year onwards, we should be having substantial bookings coming from it. Saudi Arabia is a bigger market than Abu Dhabi, Qatar, Bahrain and Kuwait put together. So it is a huge opportunity. We only had to sort out certain issues on the NT strategy. Therefore, by end of this year, we will be ready for the Saudi market. So these three markets will be addressing Saudi Arabia, Qatar and Abu Dhabi. It will provide us huge opportunities and pure growth in the next few years.        

Q: One more key issue that was raised in the conference was textile machinery that was being spoken about. Can you throw some light on what are your plans?

A: Textile machinery business had peaked somewhere in 2006-2007. At that time, month on month, there were huge bookings taking place. Last one year it has been a subdued market. In fact, starting from October there was substantial cancellation of orders and it was a matter of concern. However, February onwards, month on month, the fresh bookings have been higher than the previous month. Therefore, there is visibility on this business and there are positive signs. Probably faster pace will take place over the next few months. We believe that the next year, which is 2010-2011, should be a significantly better year for textile machinery business as compared to the current year and previous year.    

Q: What about the air conditioner business, which is your main business. What is happening on that front?

A: Room air conditioner business has done very well. From this year in first three months, April, May and June, the market was a little subdued but thereafter month on month there has been substantial demand in room air conditioner market, which is primarily driven by the late monsoon or scanty monsoon and very severe summer. In the second quarter, which is normally low in terms of turnover, we got about 10% of our overall annual turnover. However, this year it contributed much higher sales. Therefore, the margins also expanded very well in last quarter. October also has been very good. This shows that consumers who were reframing from committing more money on consumer durables are back in the market with confidence.

Q: You said that you would look at small acquisitions. Can you elaborate more what kind of geographies or verticals you are looking at?

 A: We are looking at acquisitions for adjusting the business in the first segment that is electro-mechanical business. We are also looking at companies which can provide us technology for chemical resin based treatment of water and water purification. We have been also looking at some company which provides us pre-qualification in certain industrial segments which are very attractive. We are primarily looking at companies of the size of Rohini which is about Rs 150-200 crore. We also have free cash available on our balance sheet and that should be adequate for meeting the requirements for such acquisitions. So we do not really need to dilute the shareholding.