Sugar and turbine maker Triveni Engineering has experimented with energy exploration in the nineties, with rural retail in the last decade. It later sold its drilling rigs to an Indian company and its retail venture got shut last year. The company now aims to focus on its four businesses — sugar, turbine, high speed gear and water business. It recently demerged the turbine business. Dhruv Sawhney, chairman and managing director, speaks to Ajay Modi about the company’s strategy. Edited excerpts:
What made the company demerge its turbine business?
There were a few reasons behind demerging the turbine business. First, we felt the business had reached maturity and required special focus. Secondly, it had great growth possibilities. Thirdly, it could bring in different types of partners that would have helped it to go global. These could have been best done in a separate company. This would unlock shareholders value.
Why only the turbine business?
We have good confidence that in time even water and speed gear business would reach maturity and there will be a need to demerge them. Therefore, we demerged turbine only. After demerger, Triveni Engineering has three main business — sugar, water and high speed gear. It also has a 21.8 per cent stake in Triveni Turbine.
How is the company’s high speed gear business doing?
We have about 70 per cent share in high speed gear business. The agreement with Lafkin of US for gear business has been renewed in January and extended the range to the maximum, that is, 60 Mw for 100 per cent manufacturing domestically. Prior to renewal, the higher Mw gear was imported.
Will you expand the export of high speed gear?
We have increased our presence in Africa and West Asia. Both are big markets and we have just hired engineering and marketing team. We will be looking at other markets which Lafkin cannot enter. We have manufacturing capability to double speed gear production by end of year and taking turnover from Rs 118 crore to Rs 200 crore. We are one of the most efficient speed gear manufacturers. Our competitor in steam turbine business-Siemens-has its own high speed gear subsidiary in Chennai. Siemens still buys half of its requirement from us.
Is the company looking to widen its presence in high speed gear?
We are now looking at industries such as cement, steel and coal that require niche speed gears. In next 3-4 months we should be able to enter that segment with a global partner. The domestic market size in such niche product is Rs 2,000 crore. For high speed gear we are normally looking at 30 per cent growth. Once we enter niche areas, growth will be even higher.
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Is the water treatment business also growing as fast as other businesses?
Yes. In water we are looking at 40 per cent compounded annual growth rate (CAGR) for next 5 years. It had a turnover of Rs 160 crore last year and orders on hand is Rs 500 crore. The turnover should go to Rs 230 crore in the year ending September 2011. In Agra, we are doing Rs 160 crore drinking water treatment project for the municipal corporation along with a contract worth Rs 160 crore to run it for ten years.
We did sea water desalination for Lanco’s power plant in Karnataka. This will enable us to get more such projects. We are also doing sewage treatment project in Hyderabad. Under this we are treating the effluent and discharging into the Hussainsagar Lake. The credential of Triveni in water business has been established with these projects that would be crucial for our future bidding.
The sugar business has been a drag on and off. How does the next season look?
I believe we have come out of the bottom in sugar. International market is not going to have as much surplus as forecasted earlier. Last year increase in production in Thailand, Pakistan was factored in. Ethanol production is on the rise globally. Due to limited area domestic planting increase will be restricted and not big enough to impact pricing. Moreover, we are going to open with usual opening stock.
Our company’s sugar business is going to turn around well because our capacity utilisation will be increasing sharply. The four greenfield plants that were set up in 2006-07 have seen a massive increase in planting and acceptability of high yielding varieties. Our debt levels have come down and interest outgo will be lower.
What is the status of GE Triveni?
GE Triveni will manufacture turbines above 30 Mw and up to 100 Mw is now a subsidiary under Triveni Turbine. It will have 100 per cent manufacturing with full technology transfer from both parties. The venture was started in February this year due to delay in requisite permissions. The turbine will be made at Triveni’s existing Bangalore facility. The capacity can go up by another 80 per cent by increasing shifts.
What went wrong with the rural retail venture and caused its closure?
Retail was a low margin business with lesser scope of high returns. It was not something where the best management, time and capital could have been deployed.