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Kalpataru Power: Brief overview

Apr 8, 2008

Incorporated in 1981, Kalpataru Power Transmission (KPT) is one of India's leading engineering, procurement and construction (EPC) companies providing services to the power transmission sector. KPT has its manufacturing facility in Gandhinagar, Gujarat. The promoter of this firm (63% stake) is the Kalpataru Group, a Mumbai based real estate and property development organisation. Over the years, KPT has diversified its business by way of entering businesses like real estate, pipelines, rural electrification and distribution, biomass energy, construction and warehousing and logistics. In this article, we analyse the various business segments of the company.

Transmission and distribution: The T&D division is KPT's principal business, accounting for 83% share of its revenue (FY07). Its capabilities include designing, testing, fabricating and galvanising of towers and services from erection to stringing and commissioning of extra high voltage (EHV) transmission lines of upto 800 KV. This division has an annual installed capacity for manufacturing transmission towers and steel structures of upto 84,000 metric tonnes (MTs). The company has designed, manufactured and supplied more than 550,000 MTs of tower and substation structures till date.

Foraying into rural electrification and distribution was a gradual step that KPT took to grab the opportunities presented by the government/distribution utilities with initiatives such as the Accelerated Power Development and Reform Programme (APDRP) and the Rajiv Gandhi Grameen Vidyut Yojana (RGGVY). The company provides EPC services for distribution projects of 11/33 KV lines and substations.

Infrastructure (Pipelines): In 2005, KPT made its entry into the pipelines business to grab the opportunities in the oil and gas transportation sector. The company has made large capital expenditures to purchase pipeline-laying equipment since then. KPT is relatively a new entrant in this sector and thus has entered into consortium agreements/joint ventures with overseas pipelines contractors for their expertise and experience. This division's major clients are energy companies like HPCL and GAIL. This segment contributes 9% of the company's sales.

Biomass energy: In 2003, KPT ventured into the power generation business using renewable/non-conventional fuels such as agricultural waste and crop residue. The company has set up two 7 MW biomass based power plants in Rajasthan. Infrastructure for the collection and storage of 75,000 MT of biomass has also been made to avoid shortfalls in fuels requirements. The company has signed Power Purchase Agreements (PPAs) and wheeling agreements with the Rajasthan Vidyut Prasaran Nigam (RVPN) along with three Rajasthan based distribution companies. This segment contributed a mere 2% to the company's topline (FY07).

Construction: KPT entered the civil construction segment last year by acquiring a controlling stake in JMC Projects India (JMC), after which the latter became its subsidiary. KPT currently it holds 52% stake in JMC, which is a civil construction company having experience in execution of projects such as buildings, software parks, factories, roads, bridges and metro stations. It also has marginal presence in the mining and quarrying business.

Real estate: Being the core business of the Kalpataru Group, it would have been an obvious step for KPT to enter the real estate and property development business. The company develops premium residential building and complexes in Mumbai and Pune. Its latest project was completed in 2005, the Kalpataru Habitat, a complex in Parel, Mumbai. Since then, the company has not constructed any properties. This division's share has been very marginal in the past two years. However, the company has plans to construct more properties in the future.

Carrying on with its diversification initiatives, KPT has also planned entering into the warehousing and storage/logistics business. Foreseeing the potential of warehousing and storage requirements in our country, KPT invested 65% stake in Shree Shubam Logistics (SSL) recently to capitalise on the opportunities in this segment. SSL will construct high-end warehousing facilities for both, cold and dry storage across the country. Land for the same has been purchased in states like Rajasthan and Gujarat.

Our next article on KPT will include an analysis of the company's financial and stock performance over the past few years.


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