VOLTAS LIMITED
History of Voltas Ltd A global air conditioning and engineering services company named Voltas Limited was incorporated in 6th September of the year 1954 under Tata group. As a Tata enterprise, the company offers engineering solutions for a wide spectrum of industries in areas s ch as u heating, ventilation and air conditioning, refrigeration, electro -mechanical projects, textile machinery, machine tools, mining and construction equipment, materials handling, water management, building management systems, indoor air quality and che micals, the operations have been organized into four independent business -specific clusters, such as Electromechanical projects & services, Engineering products & services, Unitary Cooling products for comfort and commercial use and others. The Company'sall core capabilities are certified under ISO 9001: 2000 and the Voltas executed projects inover 30 countries worldwide. For the manufacture of machine tools, the company promoted Scottish Indian Machine Tools Ltd during the year 1963 in collaboration with Scottish Machine Tool Corporation of Glasgow. During the year 1964, the company made a collaboration agreement with Eaton Yale and Towns, U.S.A., for the manufacture of Yale forklift trucks. Also in the same year, Voltas had joined the Mine Safety Appliances Co., U.S.A., and Associated Battery Makers (Eastern) Ltd., Calcutta in the promotion of Mine Safety Appliances Ltd., Calcutta, a joint venture for the manufacture of miners' electric safety cap lamps and other types of safety and protective equipment, appliances, detection and measuring devices. A new division, the Agro-Industrial Products Division was added in the year 1966. With effect from 1st July of the year 1979, Tata-Merlin &Gering Ltd (TMG) and the National Electrical Industries Ltd (NEI) were amalgamated with the company. Voltas had entered into an agreement with May &Christi of West Germany in the year 1982 for the manufacture of dry type transformers of cast-resin design. The machine tool division of the company made an agreement with Fanuc of Japan in the year 1988 for the technical collaboration to p roduce CNC drilling centers. With effect from 1st March of the year 1989, Voltas Ltd was amalgamated with the company as per the order of BIFR. The machine tools division of the company ha d introduced Fanuc CNC drilling centers in the period of 1990. During the year 1991, the appliances business division of the company had launched theduct able split air-conditioner, specifically needed for shops, showrooms and general office areas. Also i the same year, an n
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agreement was signed for updating technology and for the manufacture of new models of P&H hydraulic cranes. During the year 1992, the company restructured its operations into product group I comprising refrigerators, pharmaceuticals andconsumer products and beverages while product group I (A) include textile machinery. Product group II consisted of machine tools, materials handling facility, industrial machinery, air-conditioning pumps and projects. Group III comprised of chemicals plant, chemicals division and agro-industrial products. The cooling appliances business of the company had launched four new products in the year 1993 viz., water coolers filled with purifiers duct able and slim-line 3 ton airconditioners, ceiling mounted split in 1.5 and 3 ton capacities and 2 ton room split units. Also in the same year, the pharmaceutical and consumer products division was closed and had also withdrawn from the beverages business. In the year 1994, Voltas had introduced 250 L refrigerator in the market under the home appliances division. Voltas bagged Good Corporate Citizen Award in the year 1995 and also the company had introduced Soft Look' models of refrigerator in 165 L. & 200 L segments. Pumps and projected business division of the company had successfully developed, manufactured and commissioned the largest sizes of horizontal and vertical pumps in its range during the year of 1996. Voltas had entered into a lease rental agreement with SIPL for lease of factory premises of WNC in the year 1997 for a period of 18 months for a total consideration ofRs 10.250 million and also in the same year, the company hadfinalized yet another contract as original equipment manufacturer (OEM) with one of the white goods majors, LG Electronics, to manufacture and supply direct cool refrigerators. The Company had commissioned Dadra plant in the year 1998 and in end of the same year 1998, Voltas won two of the world's biggest orders in the mining sector from Coal India Ltd (CIL), such as Rs 9180 million 2 shovels (P&H) and 160 dump trucks (Unit Rig). During the year 2000, L. G. Electronics India and Voltas had entered into a tie for -up the 12, 00,000 direct-cool refrigerators from the latter for the next three years. Voltas had entered into road construction equipment during the year 2001 under the engineering products and services segments. Also in the same year of 2001, the company had re launched air conditioners under the brand name Verdant', a premium model targeted at the retail segment. During the year 2002, Voltas made a Joint Venture agreement with Sermo Montagu, France for perfect molds. Entered into a distribution tie-up with the 62 million euro Italian air-conditioning majorUnifier in the year 2004, which specializes in the design, production Bapuji Academy of Management & Research, Davangere. Page 2
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and supply of precision air conditioning and cooling solutions for telecom and internet applications. Also in the same year, made tie-up with RBS Home Appliances Ltd for the use of 640 service centers that Voltas had across the country for after sales service. Simstools Ltd became a wholly owned subsidiary of the company from 27th August of the year 2005. The Company had launched new range of water dispense in the same year of 2005. rs Voltas had entered into the water treatment business, had un dertaken a project at Salt Lake City in Kolkata during the year 2007. The Company had launched a whole new range of Room ACs for the premium and luxury segments in March of the year 2008. Voltas had purchased 13,821,000 equity shares of Rs 10 each of Unive Comfort Products (P) (UCPL) rsal in June of the year 2008, a 50:50 joint venture company between Voltas andFodders International Air-conditioning (P) (FIACPL). As at August 2008, the company entered into a definitive agreement to acquire majority stake in Rohini Industrial Electricals (RIE), a Mumbai-based company engaged in undertaking large turnkey electrical and instrumentation projects for industrial and commercial sectors. Company Profile Voltas is one of the world's premier engineering solutions prov iders and project specialists. Founded in India in 1954, Voltas Limited offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and construction equipment, materials handling equipment, water management & treatment, cold chain solutions, building management systems, and indoor air quality . The Company's strengths lie principally in Management and execution of electro-mechanical projects, including air conditioning and refrigeration The design and manufacture of industrial equipment, cooling appliances and materials handling equipment Sourcing, installation and servicing of diverse technology -based systems serving Indian industry through representation of global technology leaders.
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Company Overview Incorporation Year Chairman, Managing Director Company Secretary Auditor Registered Office 1954 IshaatHussain V P Malhotra Deloitte Haskins & Sells Voltas House A Block, Dr. B A Road Chinchpokli, Mumbai, 400033, Maharashtra 91-22-66656666 91-22-66656311/66656231
[email protected] http://www.voltas.com 1 500575 A VOLTAS VOLT IN VOLT.BO INE226A01021 1 Mumbai,NSE 3 Jul/Aug Aug TSR Darashaw Ltd, 6-10 Haji Moosa, PatrawalaInd.Estate, DrEMoses Rd Mahalaxm, Mumbai - 400 011. 91-22-66568484 91-22-66568494 Management Team Designation Chairman Director Director Director Director Company Secretary Director Director Additional Director Name IshaatHussain Nasser Munjee Ravi Kant N D Khurody N N Tata V P Malhotra Jimmy Bilimoria S N Menon NaniJaveri Remunerations 3,320,000.00 1,870,000.00 585,000.00 1,765,000.00 1,325,000.00 2,675,000.00 1,560,000.00 585,000.00 Page 4
Telephone Fax E-mail Website Face Value (Rs) BSE Code BSE Group NSE Code Bloomberg Reuters ISIN Demat Market Lot Listing Financial Year End Book Closure Month AGM Month Registrar's Name & Address
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Credit Rating Rating Date 25-10-2010 Security Type Commercial Paper/Short Term Debt Debt Progamme Amount Rating Rating Type 60 A1+ The prospect of timely payment of debt/obligation is the best. Risk factors are modest and may vary slightly. The protective factors are strong and the prospect of timely payment of principal and interest as per terms under adverse circumstances, as may be visualized, differs from "LAAA" only marginally. The prospect of timely payment of debt/obligation is the best. Risk factors are modest and may vary slightly. The protective factors are strong and the prospect of timely payment of principal and interest as per terms under adverse circumstances, as may be visualized, differs from "LAAA" only marginally. Risk factors are modest and may vary slightly. The protective factors are strong and the prospect of timely payment of principal and interest as per terms under adverse circumstances, as may be visualized, differs from "LAAA" only marginally. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. Risk factors are modest and may vary slightly. The protective factors are strong and the prospect of timely payment of principal and interest as per terms under adverse circumstances, as may be visualized, differs from "LAAA" only marginally. Page 5
25-10-2010
120 LAA
25-10-2010 25-10-2010
Debt Progamme Term Loan Programme
1500 A1+ 30 LAA
21-07-2009
Term Loan Programme
30 LAA
21-07-2009 21-07-2009
21-07-2009
Debt Progamme Commercial Paper/Short Term Debt Debt Progamme
1500 A1+ 60 A1+
120 LAA
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VOLTAS LIMITED
18-02-2008
11-01-2007
29-01-2004 09-04-2002 30-09-2001 31-08-2001 30-06-2001 16-03-2001 09-03-2001 28-02-2001 31-10-2000 30-06-2000 30-04-2000 31-12-1999 30-12-1999 30-09-1999 16-11-1998 28-02-1998
Commercial Paper/Short Term Debt Commercial Paper/Short Term Debt Commercial Paper Commercial Paper Short Term Debt Commercial Paper Short Term Debt Commercial Paper Commercial Paper Short Term Debt Short Term Debt Short Term Debt Short Term Debt Short Term Debt Commercial Paper Short Term Debt Commercial Paper Long Term Debts
60 A1+
The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. The prospect of timely payment of debt/obligation is the best. Risk factors are more variable and greater in periods of economic stress. The protective factors are average and any adverse change in circumstances, as may be visualized, may alter the fundamental strength and affect the timely payment of principal and interest Page 6
60 A1+
60 A1+ 40 A1+ 0 A1+ 40 A1+ 0 A1+ 40 A1+ 40 A1+ 0 A1+ 0 A1+ 0 A1+ 0 A1+ 0 A1+ 25 A1+ 0 A1+ 0 A1+ 0 LA+
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as per terms.
Electro-Mechanical Projects & Services (EMPS)
Voltas has been in the business of providing Heating, Ventilation, Central Air -Conditioning &Refrigeration solutions to commercial buildings & complexes. This business is popularly known ashlar. Lately and especially in the Middle East & South East Asia, it has expanded this business from HVACR to EMPS. Besides HVACR, EMPS also includes providing electrical system, building management system, lift management system, security system, information management system,etc. These solutions are provided on turnkey basis. Voltas manufactures key equipment¶s like Central AC plants, Chillers, Commercial air conditioners & refrigerators required for these projects. Otherequipment¶s are procured from outside. In India, it mainly executes HVACR projects, as EMPS concept has not yet taken off in India. International projects are mainly EMPS projects. It has executed projects in over 30 countries. It¶s India¶s largest exporter in the field of Electro-Mechanical. Blue Star, Carrier Aaron, and ETA are major competitors in India. Voltas has 25% market share in the domestic market in this business. For international projects, it competes with many other players. In this business, Voltas is currently executing projects in India and the Middle East with total order book size of Rs.24bn. It customers are from diverse sectors such as Airports, Malls, Hotels, large commercial and residential projects, IT& ITES, and Hospitals. It also provides maintenance services to smaller projects. Large projects arrange for the maintenance on their own. Some of the projects that Voltas executed in India are: MagarpattaCybercity, Pune Safe Hospital, Mumbai ITC Hotel, Mumbai Ambi Mall, delhi TCS Office Complex, Hyderabad Some of its international projects: Conference Palace Hotel, Abu Dhabi - EMPS Mall of Emirates, Dubai, UAE - HVAC New Hong Kong International Airport, World¶s largest passenger terminal (1995) Changi Water Reclamation Project, Singapore ± EMPS (completed in QE Mar07) Engineering Products & Services (EPS) In this segment, Voltas is largely a distributor of engineering & capital equipments for which it gets sales commission. It also provides repairs & maintenance service in case of major breakdowns. As it is largely a commission & service revenue business, apparent revenues are lower and apparent margins are very high. At present, this segment contributes over hal of Voltas¶ operating f profit. It represents over 40 manufacturers from across the globe for: Textile machineries Machine tools Mining & construction equipments Material handling equipments Bapuji Academy of Management & Research, Davangere. Page 7
VOLTAS LIMITED
Voltas offers total solutions from concept to commissioning, training and maintenance. It operates as a product support arm for principal manufacturers. Textile Machineries It distributes spinning, knitting, and weaving machineries & accessories. In spinning, it represents LMW group and has over 60% market share. Voltas does 75% of LMW¶s sales, balance is done byLMW group co Super Sales. Voltas makes 4% commission on these sales. In knitting & weaving, it Impetus Advisors -Company Research: Voltas Ltd Page 4 of 14represents Tarot, Germany and Heliot, France. Some of its competitors are Kirloskar Toyota (ring frames for spinning) and India Card Clothing (carding equipment for spinning). Machine tools It represents 11 manufacturers from India, Germany, Switzerland, and Japan. It is one ofthe leading machine tools suppliers in India mainly for automotive segment. It recently added food processingequipment¶s in the range. Mining & construction equipment¶s Voltas represents seven manufacturers from the US, Switzerland, Australia, the UK, and Korea. Coal India is its major customer for mining equipment¶s. In this business, it competes with company¶s likeBEML, L&T, and Ingersoll Rand. Voltas is market leader in Mobile Crushers for road construction. Material handling equipment¶s It represents three principals from Sweden, Germany, and France and sells mainly to automobile segment. In this business, it also does manufacturing of Forklift Trucks and is now amongst the largest manufacturers of forklift trucks with 36% market share in India. Godrej is a major competitor in Forklifts. Unitary Cooling Products for comfort & commercial use (UCP) This business segment involves marketing & distribution of branded air conditioners (Window ACs, Split ACs,( Specialized ACs) commercial refrigerators, water coolers, and water dispensers for use in residences, offices and other commercial establishments. It imports some of its products.
Key Investment Arguments
No more restructuring Pains With the closure of loss making erstwhile Alyn refrigerator unit at Hyderabad in Jun-06 by offering VRS to all its employees and shifting production of profitable products to a new unit in Pant Nagar, Uttaranchal; Voltas has put an end to all the pains of this loss making domestic refrigerator unit and its restructuring costs. There will be no more closure costs including VRS costs from now on. Earlier losses and then restructuring costs including closure & VRS Costs were impacting profits and cash flows. With the restructuring pains behind it, it can now focus on profitable growth in its core business segments with vigor.
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Electro-Mechanical Projects offer huge opportunity India and the Middle East are witnessing unprecedented boom in construction and infrastructure development. This offers huge multi-year market opportunity in electromechanical projects space. Dubai was the first country in the Middle East to invest significantly in development of infrastructure for tourism development over the last few years. Success of Dubai¶s investments in tourism infrastructure propelled other Middle Eastern countries, who earlier viewed Dubai¶s audacious move withscepticism, to follow its path. Now most countries there have lined up mega investments and this entails a multi-year opportunity in EMPS business. Contrary to popular perception, the construction boom in the Middle East is not due to petrodollars (influx of dollars due to significant rise in crude oil price). Dubai¶s construction boom started when crude was at $26. Therefore, even if crude price falls significantly, we do not see any risk to this construction boom there. We listed some international projects Voltas completed on page3. Voltas currently has an order book of Rs.18bn for international projects executable over 2 years. Some of these orders are: Jumeirah Beach Residence, Dubai, UAE Burj Tower, Dubai, UAE Wafi Hotel, Dubai, UAE Intercontinental Hotel, Abudhabi,UAE Refurbishment Project Bahrain City Centre, Bahrain Movenpick Hotel & Centre Residence, Dubai, UAE Al-Udeid Defence Project, Qatar New Doha International Airport, Qatar The Interim Doha Convention Centre, Qatar.
Risks / Concerns
Growth linked to Economic & Industrial growth in India A sustained & significant slowdown in Indian economic & industr growth may adversely ial impact construction boom in India in sectors like Retail, Multiplex, Hospitals, Hotels, etc affecting growth of HVACR project business. A consequent slowdown in industrial capex g rowth will impact growth in its Engineering Products business and cooling products s ales to commercial and industrial customers. Insurgency in the Middle East Any insurgency or flare-ups in the Middle East, a la Iraq or very recently in Iran or for that matter in Thailand last year, may jeopardize its projects, if any in the region This also has . implication for order book and future growth, as Voltas is betting big on the MiddleEast driving its EMPS business growth. A sustained tense environment can adversely impact growth in tourism, the nucleus of construction boom there. Shortage of skilled manpower in the Middle East The Middle East is facing significant shortage of skilled manpower specially experienced people in procurement and project management. This makes it imperative for aproject bidder to be restrained in accepting large amount of orders, as it may not get enough manpower to execute them leading to liquidated damages. Voltas has been cautious and selective in accepting orders largely on this count. This caps order book and revenue growth. The Bapuji Academy of Management & Research, Davangere. Page 9
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continued shortage may lead to rise in manpower costs and may put pressure on margins of projects already bid for. Voltas so far did not have to pay liquidated damages for any of its projects. Even projects currently under execution are unlikely to be delayed beyond outer time limit for completion. Cost escalation risk in turnkey projects EMPS turnkey projects are all fixed cost contracts. As per the industry practice, these contracts do not carry any cost escalation clauses. Though Voltas makes back -to-back tie up for inputs for 60-70% of costs, escalation risk remains open on balance. Even for the back -toback component, risk remains open between the time of making the bid and that of placement of purchase orders. This time duration is normally 8-9 months. There have been cases in the past where cost escalation ate away its margins. Forex Risk In most of its international turnkey projects, revenues and costs are d enominated in local currencies, which are linked to USD. Therefore, Voltas is exposed to the risk of INR appreciation vis-à-vis USD, though only to the extent of project net profit. Temporary rupee appreciation can be taken care of by postponing repatriation till exchange rate becomes favourable. However, a sustained rupee appreciation can dent its profits.
RECOMMENDATIONS
Fundamental Analysis The Voltas Ltd Net profit margin ratio is 7.45% It indicates that the investor should not buy this company shares because Net profit margin is less than 10%.
The Voltas Ltd Gross profit margin ratio is 8.43% It indicates that not good sign the investor should not buy this company shares because Gross profit margin is less than 15%.
The Return on Investment of Voltas Ltd is 5.14% it is good sign to investor h to ave buy the stock of Voltas Ltd.
The company Return on Net Worth is 29.50% it is showing good sign to buy the Voltas Ltd stock because Return on Net Worth is more than standard that is 11%.
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The company Price Earnings ratio is 22.41 days it indicates that good sign the investor have to buy the Voltas Ltd stock because it is more than standard that is 20 days.
Technical Analysis Beta is >1 sell Beta is <1 better to buy. Beta is -1 good to buy
In case Voltas ltd the Beta is 0.39188 this is indicates investor have to buy the Voltas Ltd stock.
Conclusion:
After fundamental and Technical analysis I want to conclude that if investor wants to buy the stock of Voltas Ltd they can buy. The company also making continuous profit and paying continuous dividend.
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Balance sheet
Year SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Secured Loans Unsecured Loans Total Debt Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Less:Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities Mar 10 33.07 962.15 0 0 995.22 19.08 0 19.08 1,014.30 306.38 139.31 0 167.07 0 7.61 339.96 Mar 09 33.07 695.92 0 0 728.99 128.44 0 128.44 857.43 293.93 129.83 0.7 163.4 0 9.65 235.8
6,542.46 5,308.75 847.28 816.84 402.86 400.24 238.49 224.93 8,031.09 6,750.76 7,304.81 6,081.86 245.66 241.91 7,550.47 6,323.77 480.62 426.99 0 0 46.55 48.56 27.51 26.97 19.04 21.59 1,014.30 857.43 340.34 270.75
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Profit and loss
INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Gross Profit Depreciation Profit Before Tax Tax Fringe Benefit tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend Equity Dividend % Earnings Per Share-Unit Curr Earnings Per Share(Adj)-Unit Curr Book Value-Unit Curr Mar 09(12) 4,070.25 36.96 4,033.29 133.55 153.62 4,320.46 3,114.68 2.54 417.22 12.28 212.79 170.8 0 3,930.31 390.15 6.62 383.53 16.59 366.94 112.3 3.2 -1.15 252.59 26.04 226.55 0 58.6 0 248.94 62.25 52.94 0 160 7.37 22.04
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