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TVS group company Wheels India expects its two manufacturing plants catering to the power sector to break even this year.
Wheels India, which primarily makes steel wheels for the auto industry, diversified into the power sector last year as a buffer against the volatile automotive market. Into the second year of operations, the plant at Wadhra, Nagpur, will break even in FY11-12, said Mr Srivats Ram, Managing Director, Wheels India.
The Wadhra plant was set up to manufacture steel structural components such as girders and columns for power projects. Wheels India currently supplies to BHEL from this plant.
Mr Ram also expects its other plant in Irungattukottai, near Chennai, which makes parts for windmill manufacturers, to break even this year.
The investment on both these plants is around Rs 30 crore.
Wheels India is going through a “massive restructuring” to focus better on individual plants from a logistics point of view. “We are looking at relocation of lines in facilities where the cost advantage is more beneficial. For instance, if a customer's production centre has changed from one part of the country to another, we will look at production from that region.”
The company, which has a debt equity ratio of 1.75, plans to invest in line with profits after tax and depreciation. “Last year, we invested around Rs 65 crore. This year too, we will invest based on cash generation in things that are not capital intensive. Our focus this year will be on cost discipline and improving profits to fund more.”
The company is bullish on the mining and construction equipment market globally. Majority of the business in this segment comes from the export market.
The auto industry, which accounts for over 75 per cent of its overall revenues, will grow at a muted rate of 8-10 per cent this year on the back of overall uncertainties, said Mr Ram. “But this is just a short-term aberration. In the long term, it will see 14 per cent growth rate for the next five years.”
For the first quarter this year, Wheels India posted a 19.5 per cent rise in net sales to Rs 459 crore, while net profit was Rs 7.19 crore (Rs 2.84 crore).
The company stock was up 7.23 per cent on the BSE to close at Rs 275 on Wednesday.
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