Power insulator maker WS Industries (India) Ltd, is looking at becoming the world's fifth-largest manufacturer. It has weathered some turbulent times, but the Rs147-crore one of the country's leading insulator companies, is pursuing ambitious plans to leapfrog from 11th place to the world's fifth-largest porcelain insulator manufacturer.
The flagship company of the Rs225-crore WS group, it has decided to set up a new 8,000 tonnes per annum (tpa) plant; to modernise and expand its existing Chennai unit and, at long last, enter the high-end porcelain insulator segment.
While the company is yet to finalise the location of the proposed Rs100-crore plant, Murali Venkatraman, vice chairman of WS Industries, says, "We are looking at Andhra Pradesh, Gujarat and Tamil Nadu. As nearly 90 per cent of the production will be shipped overseas, the plant has to be set up in a port city." Expected to be ready by 2008, the new plant will make hollow porcelain insulators in the range of 72kV to 171kV.
"The expected increase in turnover when the plant goes on stream will be around Rs275 crore," adds Narayan Sethuramon, managing director. Last month, it signed a technical and marketing agreement with the US-based PPC Insulators, the second-largest insulator manufacturer in the world, under which the latter will provide necessary technical inputs for the new plant and bake high capacity insulators, disc insulators and direct current insulators.
On the marketing side, the American company will source substation insulators of up to 171kV for its overseas markets from W S Industries. In return, WS Industries will market a higher voltage range of products (400kV) made by PPC Insulators in India and neighbouring countries. "The idea is to make the product at a location where it is most cost competitive," explains Venkatraman. The company has a production process efficiency of 85 per cent - factory rejects account for around 15 per cent.
Apart from the new plant, WS Industries will investing around Rs15 crore to modernise and upgrade its existing Chennai plant, increasing its capacity from 14,000 tpa to 16,000 tpa. Following the expansion and modernisation programme, the company's production capacity will go up to 24,000 tpa.
Sethuramon says, "The domestic insulator industry is worth around Rs666 crore, and is growing at 20 per cent." Official projections say that by 2012, the length of transmission lines will go up to 3.5-lakh circuit km. "Around $65 billion is going to be invested in the power transmission sector. There is a huge growth potential in inter-regional power transmission," he points out excitedly. The Power Grid Corporation (PGC) is one of its largest customers. It also supplies to ABB, Areva, Siemens, National Thermal Power Corporation (NTPC) and state electricity boards (SEBs).
In the domestic market, WS Industries is second to market leader Birla NGK Insulators, the world's third-largest insulator manufacturer. "Overseas we will target the new substations that are coming up. The tie-up with PPC Insulators will enable us to enter the East European market," says Venkatraman.
According to him, the global insulator market is around $2 billion. "Of that, 72 per cent is accounted by porcelain insulators and the balance is shared between glass and composites." The Asian porcelain insulator market excluding China and India is around $270 million. The demand for electricity in China and parts of South America are driving global insulator makers. The company also exports insulators on private branding arrangement. "Exports account for nearly 35 per cent of our turnover," Sethuramon adds.
For W S Industries, which recently implemented a financial restructuring process, the funding for the new projects will come from private placement, debt and also dilution of its stake in a subsidiary company. Venkatraman says the company has raised Rs21.20 crore by offering a 14.9 per cent stake (31.50 lakh shares) to Schroeder Credit Renaissance Fund. The per-share value works out to Rs67.30. For the fund, it is a medium term investment, and it will have one representative on the WS Industries board.
While the company plans to raise Rs30 crore debt for the project, the balance is expected to be funded by diluting its stake in wholly-owned subsidiary WS Electric, which is implementing an IT park project, along with The Chatterjee Group (TCG) of Kolkata. As its share of the Rs250 crore project, WS Electric has offered the 14-acre plot, then valued at Rs16 crore, that it received from WS Industries in 2004, while TCG will construct the building.
According to the deal with TCG, the WS Industries can dilute a minority holding as long as it retains a controlling stake in WS Electric. He hopes to realise around Rs30 crore from the stake sale. The first phase of the 1.4-million sq ft IT park will be ready by next June.
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