Market Voice: Sudhir Trehan, MD, Crompton Greaves

'Crompton has highest margins in the industry'

Since the US and Europe have decided to generate 20 per cent of the total power from renewable resources by 2020, Sudhir Trehan, managing director, Crompton Greaves, tells Priya Kansara Pandya, that the company is quite hopeful about the order inflows coming from this source. Edited excerpts:

Looking at the June quarter, it seems that your global operations are stabilising? Your comments.
Our global operations are showing signs of improvement. Overseas sales in euro terms has risen seven per cent year on year (y-o-y) in the quarter ended June 2010. Though, on conversion into rupee, it is down eight per cent.

The downturn in the distribution of transformers, linked to the new housing construction in the US, has been compensated by rising demand for slim transformers from wind farms. As a policy, the US and Europe have decided to generate 20 per cent of the total power from renewable resources by 2020. Thus, we are quite positive on the order inflows coming from this source.

Will domestic power systems continue to record a flat performance? Is pricing under pressure?
In the power systems, there were delays in delivery to select public sector units and private players, which is expected to pick up in the next two quarters. Realisations are not under pressure.

What is the expected growth in order inflows, sales and profits for FY11?
Our standalone business will grow 14-15 per cent, while overseas units will record a five-six per cent growth in euro terms. We have highest margins in the industry, now. Thus, consolidated margins of 13 per cent in the June quarter will be maintained in future.

We do not give guidance on order inflows, but the current trend (39 per cent y-o-y rise in euro-based overseas order inflow and 53 per cent in domestic order intake) will continue.

Since most of your contracts are fixed, how does the company manage rising input costs?
Around 65 per cent of our contracts are fixed. We are not perturbed by movements in the raw material prices, as we book the material as soon as we bag an order.