Traversing Across Sectors

Elecon Engineering Company Ltd. (EECL) is one of the largest manufacturers of material handling equipment (MHE) and industrial gears in Asia. It offers a range of products and solutions in this segment for various industries such as those related to power, chemicals, steel, plastic, elevator-making, palm oil, marine engineering, cement, sugar, mining, petroleum, coal handling and fertilisers. It also manufactures wind turbines in 50 and 60 hertz (hz) frequencies. Strengths EECL, with its dominance in the MHE space, is a leader in industrial gears with a market share of 25 per cent. Moreover, EECL’s diverse product portfolio, which spans across almost all the industries in the core sector, helps the company distribute its risk well. The company procures orders based on both projects and products. Products constitute 40 per cent of EECL’s existing order backlog, which will help keep margins stable as products typically have higher margins than projects. The margins of the company have remained almost stable over the last five years with operating profit margin and net profit margin averaging 16 per cent and 6 per cent respectively. According to a report by IDFC Securities, over FY13-14, margins are again expected to remain stable, at around 15 per cent, on account of efficient cost-control and rational bidding. Being a part of the Elecon group – that largely focuses on engineering sector – adds to the operational strength of EEC

This article was originally published on July 06, 2012.