Elecon scouts for buys in Europe

Prayasvin Patel, chairman and managing director, Elecon Engineering, said, "We are looking to buy a company which will be about 60-70 per cent (Rs 840 crore) of our market cap. The discussions are at an early stage and it wouldn't be fair to elaborate on it."

The Bombay Stock Exchange (BSE)-listed company is looking for a time frame of about three-four months before talks reach at a more definitive stage, said company officials. "However, sooner or later the deal will most definitely take place as Elecon wants to aggressively grow even beyond the Indian shores," added the official.

A proposed European foray will give the firm an established network outside India and a high margin customer base.

Elecon makes stackers, reclaimers, elevators, chain conveyors, shiploader, crawler and rail mounted trippers, gear boxes among other products.

The company has not made it clear whether the target company will form synergies with its MHE division or the gear-box division. As for the last financial year, Elecon's MHE segment contributed more than half of its total revenue at Rs 437. Total turnover of the company in financial year 2008 stood at Rs 826 crore.

With a strong order backlog of more than Rs 1,300 crore, the company is targetting to exceed Rs 1,100 crore turnover in the current financial year. Orders from the power and mining sector are expected to rise this year, said Patel.

The company is hopefull of raking up to Rs 400 crore as sales in the next three years through its wind mill manufacturing arm, up from Rs 18 crore logged last year. It is looking to install about 30 megawatts by the year-end. The operations will be carried across various locations in the country.

Meanwhile, the company has also announced an investment of Rs 182 crore this year, which will be used to upgrade and enhance capacity at its manufacturing location in Vallabh Vidyanagar in Gujarat. About Rs 100 will be specifically invested in expanding capacity for the wind mill gear-box facility.