VA Tech Wabag mulls acquisitions, 1b euro revenue in 5 yrs

Nachiket Kelkar
Moneycontrol.com

VA Tech Wabag is seeking acquisition targets to expand its footprint in South America and hopes to become a 1 billion euro company by sales in the next five years in its bid to become among the top three players in the global water and waste water management business.

"Our vision is always to be in top three global water companies. And that means our revenue has to be close to around 1 billion euro in next five years. So that is the game plan we have. That is the blue-print we have drawn out for the next five years, to reach one billion, which means it's about 4.5-5.0 times of what we are today," Rajiv Mittal, Managing Director, told moneycontrol.com in an interview.

For the year ended March 2012, VA Tech Wabag's consolidated net profit rose 40% year-on-year to Rs 74 crore, while total income was up 16% to Rs 1,444 crore.

 Last year, India operations accounted for 70% of the Chennai-based company's total revenue. Mittal said in the current financial year, revenue from international operations will rise to 35% on the back of several "good" orders won in countries like Romania, Saudi Arabia and Turkey.

VA Tech Wabag has had a strong presence in markets like Eastern Europe, West Asia and North Africa. However, the political unrest in several countries like Egypt and Libya hurt its business in North African region. The company is hoping the business there will "limp back" this year. Mittal also said the company has been doing good business in Namibia and is now looking at other markets in Southern and Eastern Africa, where it doesn't have much presence.  It also wants to enter Latin America, but is sure it will not be on its own.

"Latin America, no, we don't want to do it organically, unless we can find a good company, which we can acquire. And that's how we want to enter that market, only through acquisition," Mittal said.

VA Tech has cash of around Rs 400 crore, which it aims to use for acquiring companies.

"This cash is definitely assigned for acquisition and we have been talking to many companies and many investment bankers to see if there are right targets available. (However) In the present scenario, we don't want to take somethings, which are under stress or we are not convinced about their business model," Mittal said.

VA Tech had a fresh order intake of Rs 1,862 crore in 2011-12, with order backlog of Rs 3,731 crore. This year the company is targeting a 20% growth in orders, and revenue is expected to grow 15-18% year-on-year to Rs 1,650-1,700 crore.

Some slowdown in decision making among municipal bodies has hurt business to an extent, however, there has been a steady flow of orders from industries, Mittal said.

While water and waste water treatment will continue to drive VA Tech's operations, the company is keenly eyeing water desalination projects, which it feels will be a big business in future, as states struggle with water shortage.

"As a percentage growth year-on-year, desalination is something that is going to grow faster. So desalination is definitely something we are going to keep our eye on," MIttal said.

The company has desalination project in Tamil Nadu and Mittal said some of the other states with long coastline have also shown interest in the technology.

VA Tech Wabag had hit the stock markets in 2010. Its initial public offer got a strong response with the issue subscribing over 36 times. It had set an issue price of Rs 524 (adjusted for the stock split last year) a share.

On Tuesday, VA Tech was down 0.1% at Rs 439.95 on NSE. The stock has gained 31% since so far this calendar.

Click Here to read full transcript of the interview with Rajiv Mittal

nachiket.kelkar@moneycontrol.com