"Traditionally power and industrial systems have been contributing substantially to the bottomline" - Views on News from Equitymaster

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  • Mar 16, 2000 - "Traditionally power and industrial systems have been contributing substantially to the bottomline"

"Traditionally power and industrial systems have been contributing substantially to the bottomline"

Mar 16, 2000

...in the consumer sector the margins are not very high, they have growth, but margins are only 3%-5%.

Mr. Brij Suri, Member Board, President Finance and Administration has enjoyed a long innings of 27 years with Crompton Greaves. He is responsible for the entire finance of the company and its affiliates and his portfolio includes the functions Treasury, Management Information, Accounts, Taxation, Internal Audit, Secretarial, Legal, Commercial and Information Technology.

Trained as a chartered accountant Mr. Brij Suri started his career with Peat, Marwick, Mitchell & Co., London. After a six year stint with Lovelock & Lewes, Calcutta he joined Crompton Greaves in 1973 as Chief Accountant. He rose through the organisational hierarchies rapidly from Chief Accountant in 1973 to Finance Director in 1996.

In an interview to equitymaster.com, Mr. Brij Suri, Member Board, President Finance and Administration, spoke on the power sector reforms, performance of the company's divisions and the research and development efforts of the company.

EQM: How according to you are power reforms shaping up in India?

Mr. Brij Suri: I think at the moment they are on a slow pace. Hopefully the way the government has been able to tackle the UP State Electricity Board's strike it may encourage others to go on privatisation and restructuring faster. But at the moment it is at a slow pace.

EQM: When will you see orders flowing in to you from these power projects?

Mr. Brij Suri: As soon as some action is taken by the government, basically everybody is waiting for the government to take an action. As soon as the financial closure of the large projects takes place. All these projects bulk of them are held up because of escrow cover. Most of the states say Tamil Nadu & other states they have exhausted their escrow cover, and institutions are not willing to release the funds until they have the escrow cover, that is the reason

EQM: What has been the response to the voluntary retirement schemes, how many employees have left in the past year due to these schemes.

Mr. Brij Suri: Fairly good. Last year we were able to put employees under this scheme about 1600-1800 (FY99). This year already about 300-400 are there (FY2000). The response has been reasonably encouraging, we hope that this will pick up faster in the coming years.

EQM: What are the trends emerging in each of the four divisions especially the engineering products division as well as industrial systems group?

Mr. Brij Suri: Engineering products division takes large turnkey jobs. They have one got one job as a EPC Contractor for Sujana power project which is a very large job which is again in Tamil Nadu, Tuticorin area. We are also looking at certain other large jobs in West Bengal and Madhya Pradesh.

Industrial systems basically is in motors right from fractional horse power, to large motors which go into the cement and fertiliser industry. Because of the slow industrial growth in the early part of the year the performance has been affected. Basically the industrial systems is linked with the industrial growth, this has a direct impact. Moment industrial growth starts picking up the industrial systems will start picking up. The bulk of this is in the motor business, right from fractional horse power to medium range to higher range of motors. If industrial activity does pick up, which is very likely that it will pick as it is we are showing a growth of 6% currently. Hopefully in the coming year they should do well.

EQM: With the economic upturn which of these sectors would start showing signs of improvement first?

Mr. Brij Suri: In the coming year, the consumer division is doing well and is growing at a normal pace of 7%-8%. Digital this year will grow more than 100% and will continue to grow at the rate of 35% to 40% in the coming years. Power and Industrial will depend as to how fast the acceleration of power sector reforms take place and how fast the government is able to put the industrial growth in order. Last year bulk of the growth came from the services sector, agricultural sector was very minimal.

EQM: Which of these sectors benefit your bottomline the most?

Mr. Brij Suri: Traditionally power and industrial systems have been contributing substantially to the bottomline. In the consumer sector the margins are not very high, they have growth, but margins are only 3%-5%. But in the current year because these two sectors (power and industrial) did not do very well hence we have not been performing well, that is why we have shown a loss of Rs 550 m in the first three quarters of the current year.

The digital division at the moment is showing a loss, but now that they have turned the corner they have gone on a growth path and from next year they will start showing profits . But there again profit will not be very substantial like we what have in power and industrial systems due to high margins, there again margins will be 5%-6% only.

EQM: What is the status of the Sujana Power Project at Tuticorin?

Mr. Brij Suri: We are waiting for financial closure, and the reason is escrow cover. Tamil Nadu has exhausted their escrow cover. Institutions have all approved the project, they have sanctioned the loans but provided there is an escrow cover available. One is linked with the other one.

EQM: What are the new products that have been introduced in the consumer products group in the last one year.

Mr. Brij Suri: They keep on introducing various models in fans. In fans they keep on bringing out different models. They also deal in light sources that is lamps and tubes and deal in luminaries. In a very small way they deal in home appliances. Hence per se there are not any new products introduced in the past year.

EQM: How much has the company invested in research and development efforts in the Digital division and how much does it plan to invest in future? What are the new products being developed in this division.

Mr. Brij Suri: Separate break-ups not available. Normally we do invest about 1.5% of our turnover roughly, if we take the efforts at the divisional level, SBU level and the corporate level. We have a three pronged research & development level: on the divisional level it is the product and processes, on the SBU level it is the technology etc and on the corporate level we look at overall. Combined together for all, 1.5% of turnover we are spending on research and development.

We will maintain this till such time we are able to turn the corner. We are hoping that these sectors do get revived. In the present budget they have linked the bailing of state electricity boards (SEB) with reforms. Any state electricity board which reforms and does the restructuring of generation, distribution and transmission separately the centre will bail out that SEB. Everybody is waiting for that.

No new products at the moment in the digital division, we are concentrating only on Internet Service Provider backbone, networking and switching systems. We have a large contract for ISP of Rs 10 bn approximately.

EQM: The company has launched a portal for women on Woman's Day. What are the future plans for this?

Mr. Brij Suri: Basically as it is women's international year we thought we should contribute something towards that. We will continue improving it and continue expanding it, the whole idea is to put online education etc. Later on if we can turn it into a commercial activity, why not.

Being international year of women we wanted to dedicate towards that and that's the whole idea how it started.

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