Offshore Engg centre for Siemens a strategic move:AXISCADES

Talking about their newly inaugurated engineering offshore development centre for Siemens Wind Power, in Hyderabad, Sudhakar Gande, Group VC, AXISCADES Engineering Technologies said it is a very strategic initiative for both the companies. Initially they would start with 50 people/engineers but sees scalability of 300-500 people/engineers in next 3-5 years.The potential of scalability should itself give an idea of revenues to come, said Gande.

The wind power business for Siemens is around USD 5 billion, as of now said Gande. He is hopeful for such strategic tie-ups with Siemens for other divisions going forward.

Commenting on the newly acquired AXISCADES Aerospace and Technologies in August, he said it would be EPS accretive.

AXISCADES is a an engineering service provider that caters to aerospace, defence and heavy engineering.Below is the transcript of Sudhakar Gande’s interview with Reema Tendulkar and Nigel D’souza on CNBC-TV18.Reema: Could you tell us what would be the bench strength, what is the expected revenue from this particular offshore development centre and how are you planning to scale it up?A: This offshore developments centre with Siemens in the area of wind power is being set up in Hyderabad. This offshore development centre (ODC) will be in compliance with Siemens’ all internal requirements, the processors or software, etc. So, it is extremely strategic initiative both from Axiscades as well as Siemens point of view. We will start off with about 50 people initially and over a period of three to five years, we should easily scale up to 300-500 people.Nigel: Give us some numbers in terms of revenue. Can we look at a revenue of around USD two million approximately? And in the next three to four years, I have got a report with me that states that it can be scaled up to around USD 12 million. Do you think that is possible?A: I would not like to guess about revenues being a listed entity, but I am sure at the end of the day, in the next three to five years, if I have 300-500 people, you can compute the revenue yourself.Historically, we have done a similar exercise with Caterpillar as well as Airbus. Both the ODCs scaled up to same levels in the last couple of years. So, from that point of view, whatever experience and expertise we have learned from this experience, we will put into use for Siemens. And personally, I am very confident that we will be able to reach these numbers.Reema: What is the revenue that you get from Siemens that you have decided to set up a special and a dedicated offshore development centre for this particular client? And what would be the expected revenues that you will expect from Siemens?A: Revenue, as I said, being a listed entity, I do not want to guess at this point of time, but at the end of the day, the scalability is highly possible here and that is the reason we are setting up this. As I mentioned, we are expecting to scale up between 300-500 full time engineers in this ODC over the next three to five years which will make it economically viable for them as well as for us. And as you know, the cost structure in India relative to the European operations is far less and as long as we ensure the same quality and timelines. Siemens being a global organisation and we are dealing with only wind power at this point in time, which is only a USD five billion business in Siemens scheme of things. So, this can go to other divisions at some point of time later. Therefore, it is an extremely strategic initiative, both for Siemens AG, Germany, Denmark and as well as Axiscades.Nigel: So, then let us talk about something else besides this. In mid of August, you had announced, it had acquired Axiscades Aerospace and Techonologies Private Limited. Could you tell us what was your holding in this particular company prior to that because it was a fresh issue of shares as well. And could you tell us what was your holding in that company prior to that? Will it be earnings per share (EPS) accretive? And also what does the promoter holding go to post this particular deal?A: As you know, we have announced this acquisition of Axiscades Aerospace and Technologies by Axiscades Engineering Technologies and these were already filed after the necessary approvals we have filed with the stock exchanges. And this will definitely an EPS accretive – point number one. Point number two, the share holding will increase from current level about 59 percent to about 71 percent in the combined entity which is the holding post the acquisition.Nigel: What was the holding prior to this particular acquisition because if there was a fresh issue, then it should be expanding the equity share base. So, what was holding in the company Axiscades Aerospace and Technologies prior to this particular deal?A: Axiscades Aerospace and Technolgies was 100 percent owned by the strategic investor, while listed entity, Axiscades Engineering Technologies was owned by about 59 percent. When you put them together, the combined entity, the number of shares will go approximately from 2.7 crore to about 3.7 crore and the holding will go from 59 to 71 percent and it will be EPS accretive.