Voltas mining equipment division pins hope on Vale to drive growth

Previously, India made up 80 per cent of Voltas' mining equipment business, while the rest came from Africa; today Mozambique accounts for 70 per cent of its revenues from this segment.

Voltas Mining & Construction has diverted its focus from India to Mozambique, riding high on its contract with global mining major Vale. 

Previously, India accounted for 80 per cent of its total business and the rest came from its African operations. Over the past four-odd years, its mining and construction equipment business in India was hit, due to uncertainty in the mining sector.

Now, Mozambique accounts for 70 per cent of Voltas’ revenues from the mining equipment business.

“We are optimistic that this year will show 10 per cent growth at the PBT (profit before tax) level. Apart from our contract with Vale which is driving growth, there is a lot of potential in the replacement market as well,” the company’s business head of mining, Ranjit Ravindran, told Business Standard.

According to Ravindran, this Tata Group enterprise has over the years shifted its focus from only sales and service of equipment under Original Equipment Manufacturer tie-ups towards servicing and maintenance as an independent firm. This offers better margins and eases the working capital requirement.

“Over the years, a lot of equipment has been procured by mining companies and have not been written off. It opens up a huge replacement market for us,” he explained.

In its Mozambique operations, Vale and Jindal Africa (part of Jindal Steel and Power) has been driving its growth. In this country, Coal India, Hindustan Zinc and Tata Steel are maong the major clients.

Ravindran said the growth in India for the company has been “flattish” over the years, owing to the time it takes to finalise a contract, uncertainty in the sector, delay in project execution due to various clearances and others.

While the Vedanta Group-owned Hindustan Zinc used to be Voltas’ biggest client for the equipment business, revenue from this company fell after the latter began to operate and focus on underground mines. Then, Coal India emerged as Voltas’ biggest revenue generator from India. 

Its latest annual report states Voltas continues to be the preferred partner for Vale in Mozambique and is well placed to benefit from their ramp-up in production.

“The contract with Vale will continue for the next five years, which puts us at a comfortable financial position. We are also looking at other avenues but the focus is really on profitability and not posting a fancy top line (revenue)," Ravindran told this publication.

The engineering products division of Voltas, under which the mining equipment business operates, posted flat revenue growth of Rs 312 crore in 2018-19; the company's consolidated revenue was Rs 7,085 crore.

However, the company thinks mining activity will pick up pace in India, leading to opportunities for the India business. Voltas is selectively participating in tenders, leveraging on its service expertise and network of depots. 

The mining and construction equipment division of Voltas dates back to 1954.