Gec Alsthom: Low Voltage Show

GEC Al-sthom India, one of country's largest manufacturers of electrical equipment, witnessed an erosion in its bottomline in fiscal 1996-97.

In spite of a nearly 13 per cent rise in sales turnover, net profit of the company declined by 66 per cent.

According to the chairman and managing director, R K Daga, lower sales in transformers and low voltage equipment products and higher finance costs had resulted in lesser profitability.

In 1996-97, the net profit margin of the company was only 0.52 per cent, compared with the nearly two per cent in the previous year. Operating profit (PBDIT) margin declined to 6.4 per cent from 7.8 per cent.

 

Interest burden of the company rose by 99.2 per cent and depreciation by 17.4 per cent. All these factors led to a fall on profit front despite lesser tax provision.

A 22 per cent increase in extraordinary expenses was due to the company's voluntary retirement scheme (VRS).

Increased expenses on VRS substantially eroded its net profit in 1996-97. As a result, the earnings per share (EPS) of the company fell from Rs 2.01 to only Rs 0.68 during the same period.

Through the voluntary retirement scheme, the company expects to pare its workforce from 6,625 to 5,000 by 2000.

Due to a lack of demand for electrical equipment in India, production of transformers and energy meters is showing a declining growth.

Fifty-four per cent of the company's sales income comes from the low voltage equipment division and 17 per cent from the transformer division.

Both the units suffered a demand recession in 1996-97.

Offtake of electrical equipment in the country has slowed down due to the sluggish activities in the power generating sector in recent years.

The addition to fresh generating capacity has significantly slowed down in 1995-96 and 1996-97 compared with 1994-95.

Nearly eight per cent of the company's sales comes from its export market.

In view of the sluggish demand on the domestic front, the company is planning to expand its export market through its parent company, GEC Alsthom NV.

In recent years the company has been awarded the ISO 9001 certification for its low voltage equipment, relay and control panel, transformers, vacuum interrupter and meters.

As a part of the restructuring exercise, on November 1, 1996, the company transferred its furnace business to its fully-owned subsidiary GA Danieli India.

Fifty-one per cent of the shares will be acquired by Danieli & C Spa Italy, after obtaining the approval from the members of the company.

GEC Alsthom India has commenced an exercise to reorganise and restructure the company into three key divisions.

The first will be a transmission and distribution division, the second an industrial equipment division and third, the low voltage equipment division.

In the transmission and distribution division, a focused organisation has also been created with an eye on turnkey projects opportunities.