Pricing pressures exist, expect biz to pick up soon: TRL

Transformers & Rectifiers (TRL) has entered a new tech agreement with Fuji Electrical of Japan. Company director Vinod Mason discusses the deal and business outlook.

Below is the transcript of Vinod Mason's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Anuj: Can you tell us what this agreement is about and what this would mean for your company in terms of financials?A: The segment primarily covers the higher range of transformers and reactors. We have earlier signed in 2010 with Zaporozhtransformetor (ZTR) and that covers 765 kV transformers. We didn’t have 765 kV reactors at that time from them because they had tied up with somebody else. So we were looking for a technology for 765 kV reactors for quite sometime and now we have finalised the entire range of reactors right from 400 kV to 765 kV with Fuji.We also had a gap in technology for 400 kV generator transformers though we have been manufacturing for the kV transformers from 2009 onwards, there was a gap on the generator transformer side which is a biggest requirement for NTPC. This covers the entire range of transformers. With this, we have -- on the top end which is primarily technology driven -- the entire range of transformers and reactors in our range.In terms of financials, it will not make immediate impact but the market is pretty big for this because Fuji alone in five years we will buy about 765 kV reactors plus 400 kV reactors plus the state electricity board also buy reactors and as far as the generator transformer is concerned if one lakh megawatt gets added, the transformer requirement will be about 1,25,000 MVA and that is the market.

Ekta: Can you explain to us what the revenue share with Fuji would be with regards to technology license agreement, how do these things generally work?A: We have paid them the technology transfer fee that is it.Ekta: How many other technology licenses do you have similar to this for other products?A: We have with ZTR but the arrangement is slightly different. We participate jointly in the tenders in India. We share the business with them. The technology for that comes from them in a market we give it to them.

Anuj: Last quarter was bad for you even your topline was down. How are things looking business wise now?A: We have a good unexecuted order book (UEOB), our totally UEOBis about Rs 535 crore plus. In terms of MVA it is about 16.5 thousand. That should take us through. The market has really not picked the way we were expecting but hopefully the way the projects are getting cleared and the governments focus being on the infrastructure and we being in the power sector so we do expect that the business will pick up and things will be okay. However, we have fairly good UEOB.Ekta: Can you give us the senses in terms of what the pricing pressures are at this point in time for the industry and what is the demand looking like?A: Price pressures are still I won’t say there is a much or a major improvement what it was last year. As I said earlier that the business has really not picked up the way we expected but we do expect that the business will start picking up now because the projects have been cleared.Slowly one by one they are taking care of that because once the fuel is taken care of the power purchase agreement (PPAs) (not sure) are cleared by the respective states then obviously people will start generating power and once they start generating power the whole thing will start.Besides that we have almost about 25,000 megawatt of gas based power stations which are lying ideal today because of the lack of gas. The gas policy is getting cleared shortly so those will also start coming up. Once these thing starts coming up then everything starts with the power generation. If power generation picks up the whole generation picks up. The industry is been operating about 60 percent of the capacity we hope that we should start looking for the better days.