Acquisition of UK-based PTS fits well into the company’s plans of achieving $8 billion revenues by 2015.
This will be the sixth major overseas acquisition by Crompton Greaves in a span of five years. Over the years, the company has made many strategic acquisitions overseas (Pauwels, Ganz, Microsol, MSE power and Sonomatra) where it has successfully restructured or turned around and scaled up the operations of the acquired companies. “While these subsidiaries have been unable to grow in FY10 owing to unfavourable economic conditions in Europe and North America, we expect them to return to growth from FY11,” states an ICICI Securities report.
According to the management, PTS’ acquisition was a step towards achieving revenues of $8 billion by 2015. The acquisition spree has placed Crompton Greaves among the leading transmission and distribution companies in the world. PTS’ rich exposure to comprehensive electrical engineering space and diverse clientele base in the UK will help Crompton Greaves in expanding its geographical reach, analysts suggest. PTS is also looking to tap the opportunity in the renewable energy space, a growing market in the UK.
At present, more than 50 per cent of Crompton’s sales come from overseas markets. Earnings before interest, taxes, depreciation, and amortization (Ebitda) margins have moved up significantly in FY10, from 10.7 per cent in 9MFY09 to 13.2 per cent in 9MFY10. For FY11, Kotak Securities expects 14.4 per cent revenue growth and a 16 per cent growth in net profit, accompanied by stable Ebitda margins.
The stock ended 4.8 per cent higher on April 1 at the BSE at Rs 274 and trades at 17.7x FY2011E earnings and 15.6x FY2012 consensus analysts’ estimates.