Description
Documentation is about company analysis of voltas ltd.
Voltas Ltd, one of the leading companies from Tata Group is one of the world’s premier engineering solutions providers and project specialists. It caters to huge cache of industries like 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. Voltas is India’ premier company in Air conditioning and Refrigeration industry and hence, I would like to bring up my industry analysis on the Air conditioning and Refrigeration industry. Industry Analysis: 1. Industry trends: Indian and Global perspectives, recent happenings The industry mainly revolves around the fact where people need more comfort as compared to the previous times. One of the concepts of air conditioning centralized heating started as early as third century BC. In the eight century as well, centralized cooling was seen at Baghdad during hot summers where people used ice between their walls to get a cooling effect. In such ways, an industry has been developed which uses different technologies and has gone through various environmental changes. The technology in the industry is constantly changing. Hence, every company in the industry is taking into account the continuously changing technology trends and keeping itself updated. A lot of R&D work is also being done. As the Asian and African continents are also seeing a rise in their income levels, energy needs are increasing and hence, it is having an effect on the industry. There are equipments needed which would consume less power and hence, new technologies need to be updated. The emphasis on green technology makes it very important for the industry to come up with new technologies which has its carbon emissions under a limit specified by the UN. There should be less of energy guzzling products. Carbon footprints need to be reduced. The industry has been working on the same. The size of the industry in India was $3 billion USD as of FY 2008-09. Some latest statistics about the industry has been mentioned below: Air conditioning Systems • Growth during last 5 years : over 20% Present penetration level is barely 3% • Expected growth during medium term (3~5 years) : 15~20% Segment-wise growth rate trend: • Room air-conditioners : 20% • VRF systems : 40% • Chillers : 10% • Ducted/package : 10% • Others (precision/telecom) : 25~30% Commercial Refrigeration Sector
• Growth during last 5 years : ~10% • Expected growth during medium term (3~5 years) : 10~12% Segment-wise growth rate trend : • Water Dispensers : 20% • Storage Water Coolers : 05% • Display/storage equipment : 15% The domestic growth in the sector has also seen increase in volumes because of increased heat and high wages.
2. PEST Analysis: Political, economic, social and technical aspects related to the industry
Political: Standards based on technical considerations and the decision taken by the governing bodies of the industry are beneficial for the society but when it comes to politics meddling with the industry in terms of protectionism, it is an issue for the industry. Economic: The industry is affected by price control, taxation, regulation and deregulation, labor intensity and capital control from the Government. This leads to an effect on the way the industry operates. The Indian economy is growing at a constant rate and hence, there is a good demand in the industry. Technology needs to be constantly updated and for this, import of technology is needed. Hence, exchange rates have an effect on the industry. Social: Due to increasing standard of living, the demand continues to be there for products and service from the industry. The increasing youth also demands for comfort and other refrigeration devices. The focus for refrigeration of various items is also increasing due to increasing busy lifestyle, hence the increase in demand. Safety is also an important consideration now hence, the need for technological upgrade and greener devices. Technological: The rate of technological change is high in the industry as new standards are being set up for greener devices and less energy guzzling devices. Due to this, R&D activity is also high due to lower carbon footprints in the industry. The need for refrigeration of food products is also high in the industry. Hence, new ways in technology need to be seen in order to improve the ways in which the food can be saved from rot.
3. Competitor Analysis: Analyze pricing, quality, distribution and partnerships of the nearest competitor of the company
Bluestar is the nearest competitor to Voltas in the Air Conditioning and Refrigeration industry. It mainly dominates in the domestic sector as most of its clients are from sectors such as hospitals, education and power. That in a way has decreased dependency on the global environment which looks very bleak right now whereas in the case of Voltas, 70% of the projects which it undertake are international ones. Due to the recent US recession and Euro crisis it is creating issues for Voltas. Bluestar initially had a tie up with York in the mid 1980s.With the learning experience it leveraged from the tie up , it started to manufacture its own Chillers. Blue Star has had a tie up with Kolpak, USA for coldrooms. It also had tie up with Heat Craft for Freezing Units. Technical support and technical expertise was provided by Rheem, USA for building world class Dadra manufacturing unit. The entry into precision equipment business was achieved with support from Eaton Williams. Now it is into manufacturing of Precision Packaged Control Units. Blue Star also has a huge and strong network of suppliers. For distribution of the products, Blue Star has around 180 system dealers who deal exclusively in businesses of packaged air conditioning and cold rooms. These dealers are provided high technical expertise, installation and service competence. A large network of approximately 600 dealers is for room air conditioners and refrigeration products which are easy to install. The products are created with world class methodologies and technologies. Blue Star tries to make its products energy efficient. The pricing of Blue Star is at par with the products of other competitors but the service which they provide is better than those of its competitors.
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the industry
Strengths: 1. 2. 3. 4. It is a fully modernized industry. The industry has internationally compatible products. It has the capacity to produce more than 400000 units annually. It has the potential to create a complete range for central air conditioning system of textile industry.
Weaknesses: 1. Manufacturing units are under utilized in terms of its capacity. 2. The cost of production is very high due to expensive technology. 3. Regulatory approval from environmental board is a big hurdle.
Opportunities: 1. There are huge opportunities to penetrate into the Middle East and African continent. 2. Domestic industry is also to be fully explored and utilized 3. FDI in retail could bring about an organized way of business and hence, development of infrastructure. This can be an opportunity to increase the volume of sales. 4. Conversion of window air conditioning systems to split air conditioning and centralized air conditioning is a huge opportunity which can be cashed in. Threats: 1. Cheap Chinese brands entering into the local market are a huge threat for the existing industry players. It also affects the quality of the products. 2. The items which are smuggled into the market. 3. New world trade order of open trade.
Company Analysis
1. Company description (a brief introduction regarding what businesses the company is into) Voltas Ltd, one of the leading companies from Tata Group is one of the world’s premier engineering solutions providers and project specialists. It caters to huge cache of industries like 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. Voltas’s strength lies basically in the following: a. Execution of electro-mechanical projects. It is one of the top companies in the air conditioning and refrigeration industry. b. Design and manufacture of industrial equipment, cooling appliances and materials handling requirement. c. Installation, servicing and sourcing of diverse technology based systems. Voltas’s operations have been divided into 3 main clusters: a. Electro-mechanical projects and services. b. Engineering products and services. c. Unitary Cooling products. Voltas has had projects for air conditioning at the world’s tallest building Burj Khalifa and the world’s biggest ocean liner, the RMS Queen Mary 2.
2. General information about the company: location of the headquarters, year of founding,shareholding pattern, number of employees, top management, etc.
Voltas is headquartered in Mumbai, India. Its zonal headquarters are located in Mumbai, Chennai, Kolkata and Delhi. It has its branch/area offices located in Ahmedabad, Baroda, Bangalore, Calicut, Coimbatore, Chandigarh, Delhi, Ghaziabad, Indore, Jaipur, Jamshedpur, Kochi, Kolhapur, Lucknow, Ludhiyana, Madurai, Panjim, Pune, Secunderabad, Surat, Tirupati, Tirupur, Vijaywada and Visakhapatnam.
The overseas offices are present in UAE (Abu Dhabi, Dubai), Bahrain, Qatar (Doha), Kingdom of Saudi Arabia (Jeddah) and Singapore It has its factories located in Thane (Maharashtra), Dadra (Union Territory) and Pantnagar (Uttaranchal). Voltas was founded on 6th September 1954 at Mumbai by M/s Volkart Brothers and Tatas. The shareholding pattern in the company as per 30th June 2012 has been described below: Name of the shareholder TATA SONS LIMITED TATA INVESTMENTS CORPORATION LTD EWART INVESTMENTS LIMITED THE TATA POWER COMPANY LIMITED LIFE INSURANCE CORPORATION OF INDIA ICICI PRUDENTIAL MUTUAL FUND & ASSET MANAGEMENT GOVERNMENT PENSION FUND GLOBAL EASTSPRING INVESTMENTS INDIA EQUITY OPEN LIMITED MERRILL LYNCH CAPTIAL MARKETS ESPANA S.A S.V LIC OF INDIA MARKET PLUS 1 GROWTH FUND GENERAL INSURANCE CORPORATION OF INDIA THE NEW INDIA ASSURANCE COMPANY LIMITED FRANKLIN TEMPLETON INVESTMENT FUNDS BRITISH COLUMBIA INVESTMENT MANAGEMENT CORPORATION A/C EMERGING MARKETS EQUITY FUND ICICI PRUDENTIAL DISCOVERY FUND Percentage of shares held 26.64 2.86 0.58 0.07 13.89 7.17 5.44 1.84 1.79 1.74 1.45 1.18 1.06 1.04
1.01
The number of employees currently at Voltas stands at 3600.
The top management officials at Voltas are given below:
1. Board of Directors Chairman : Ishaat Hussain Managing Director : Sanjay Johri
Director : Nasser Munjee N N Tata Jimmy Bilimoria S N Menon Nani Javeri R. N. Mukhija Vinayak Deshpande
2. Corporate Management Managing Director : Sanjay Johri President : A.K. Joshi
Executive Vice President -Corporate Affairs & CFO: Anil George Executive Vice President & CHRO: Emmanuel David Executive Vice Presidents & COO: M. Gopi Krishna Shaukat Ali Mir Pradeep Bakshi
3. Financial performance of the company: Sales, net profit, segment wise performance of the past 1 year ? ? ? ? ? Despite the challenging economic slowdown and uncertainties. The consolidated income from Voltas’ operations almost remained the same. It was Rs 5175 crores as compared to last year’s 5177 crores. The high interest rates, inflation, increase in prices of raw materials and commodities had an adverse effect on the operating profit this year. The profit reduced from Rs. 484 crores of last year to Rs. 370 crores this year. It reduced by 23.55% Y-O-Y. The profit before tax reduced from Rs. 524 crores of last year to Rs. 219 crores of the current year. It saw profit before tax reducing by huge 58.2 %. The net profit reduced from Rs. 352 crores of last year to Rs. 162 crores of the current year. It saw profit before tax reducing by huge 53.97 %. Voltas’ board also announced a dividend of 160% in FY 2011-2012. Segment wise performance of Voltas has been given below: 1. Electro-mechanical projects and services: Electro- mechanical projects and services saw a jump in the revenue at Rs. 3183 crores as compared to Rs. 3041 crores last year. However, the profitability reduced due to onerous contracts and exceptional items. The profit stood at Rs. 172 crores this year as compared to Rs. 239 crores last year. Due to the onerous contract, there has been significant upward revision in the estimated cost due to changes and delay in execution. The onerous contract has been due to the project of Sidra Medical Research Centre and Hospital at Qatar. It involves a lot of coordination between different agencies placed at the execution of this project. Voltas’ share of work has been pegged at Rs. 1000 crores but then the changes in the requirements by the clients is delaying the project execution. However, the claims have been made due to increased costs but still uncertainties remain over the payment of these additional revenue claims. Domestic project business performed well and recorded high turnover. Despite the prevailing economic conditions in the country, the electro- mechanical projects and services in the domestic industry has been able to maintain the gross profitability. The order book of the segment stood at Rs. 4292 crores this year as compared to last year Rs. 4888 crores. 2. Engineering products and services: The revenues, results and capital employed for the current year are not comparable to this year due to the transfer of Material Handling business. While the textile business has performed well on the strength of large order book, the performance of mining and construction business has been impacted by high interest rates and environmental issues. Engineering Products and services business was affected also due to global industry consolidation and takeover of some of the major principals of Voltas. Revenues this year
stood at Rs. 412 crores this year as compared to Rs.562 crores last year whereas the profit saw a dip from Rs. 103 crores last year to Rs. 62 crores this year. 3. Unitary cooling products for comfort and commercial use: Despite the unfavorable climatic conditions, subdued consumer sentiments and intense competition, Voltas maintained no 2 market position in Unitary cooling products business. The segment’s revenue dropped by 1% and was Rs. 1539 crores as compared to the last year of Rs. 1561 crores. The profit was seen at Rs. 130 crores this year as compared to Rs. 160 crores of last year.
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the company
Strengths: 1. Management and execution of electro-mechanical projects which includes air conditioning and refrigeration projects. 2. Design and manufacturing of industrial equipment, cooling appliances and materials handling equipment. 3. Sourcing, installation and servicing of diverse technology based systems serving Indian industry through representation of global technology leaders. 4. Voltas has a model Tata Business Excellence Model (TBEM) to improve business performance, bringing about a common platform for people to share their knowledge, follow the best business practices and pursue excellence across all functions. This enables them to get continuous and measurable assessment of improvement in several internal processes that leads to improvement in financial performance and great customer and stakeholder satisfaction. 5. Public work projects have been one of the strengths of Voltas. 6. Voltas is strong in its domain and the domain knowledge is also very strong. 7. Voltas’s sales and service network is very trusted across the industries it operates in. 8. It is committed at providing lifelong support for its products and services. 9. Voltas has a very good code conduct in place for all its employees including the senior management officials through which they come to know that what is required out of them to make the company successful. 10. Voltas is also strong at business ethics and values. 11. Voltas is also famous for its green mission through that it uses the best technologies to make its products and services less energy consuming and more efficient with respect to the environment. This is a very important in today’s world where there is a lot of
emphasis on environment. This helps to make them one of the global leaders in their respective industry. 12. Voltas has also worked on huge projects like air conditioning of the tallest building Burj Khalifa and the world’s biggest ocean liner, the RMS Queen Mary 2. Weaknesses: 1. Voltas is very dependent on its parent company hence, the business leadership aren’t able to take the independent decisions. Dependence also creates a problem where if the parent company fails irrespective of however good the business of Voltas would be doing, it will not be good for the company. 2. Voltas is not that proficient at its after sales service as compared to its other competitors like BlueStar, etc. 3. Voltas also needs to build up on its branding in the industry through use of better advertising strategies. 4. Voltas’s presence is more in the international market whereas only 30% of the projects are domestic. So, it needs to build up on the domestic market which is dominated by its competitors. 5. Voltas doesn’t target the mass market. 6. Voltas need to be less dependent on global projects because the economic scenario isn’t looking great for the business. Opportunities: 1. Voltas can target the Indian mass market through which it can increase its revenue and hence, profitability of the business. 2. To increase the market share and revenue, the high end value driven proposition will help. 3. It should use its strength of product differentiation more. 4. The constantly changing dynamics of the behavior of consumers present a good proposition for the company to invest in. 5. Infrastructure needs to be developed in India and other developing countries to a great extent. Voltas can use this opportunity in its favor. 6. The excise duty reduction has made the business environment and prospects more favorable for the industry. 7. The energy conservation building code is a great opportunity for Voltas. Threats: 1. Inflation is a huge threat as the raw material costs increase and hence, decreases the profitability of the business. 2. The slow growth and high fiscal deficit of Indian economy is also a threat. Due to high fiscal deficit, interest rates will be high and hence, there will be less investment and cost of money will also be high. Government will also not undertake development projects or infrastructure projects which can have a huge bearing on the business.
3. Major international players of the same industry are giving huge competition to Voltas’s market share and revenue. 4. Currency fluctuations can also have a huge bearing on the profit making of the company because of costlier technology and raw materials. 5. Companies in the domestic industry are also giving a huge competition with their low cost products and better service. 6. Due to the slower growth of the economy, there is also a decrease in the sales of consumer durables goods which could take a toll on company’s revenues. 7. Indian mass market may also be captured by the rival companies LG, Samsung, Videocon, etc.
5. Various strategies employed by the company in the course of conducting business (in the form of alliances, joint ventures, product innovation/ expansion strategies, acquisitions/ divestitures and any such strategies that you think may affect the business of the company) in past 2 years.
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On the 26th of February 2010, A K Joshi, the president of Voltas’ Electro-Mechanical Projects & Service business was elected as the president of RAMA ((Refrigeration & Air conditioning Manufacturers’ Association), India’s only apex body for manufacturers in the industry. RAMA is an active force and this helps Voltas in having huge influence on the issues of government policy, customer focus and trade. Voltas’ focus is in the Green technologies and RAMA too has a focus area of product upgradation for more eco friendliness. This helps Voltas spread its wing in the industry and a force to reckon with. On May 31, 2010, Voltas announced its Memorandum of Understanding between Sultan Enterprises L.L.C, Muscat, Sultanate of Oman for JV operations for execution of electromechanical (MEP) projects in Sultanate of Oman. This facilitated Voltas’ entry in the MEP segment in Sultanate of Oman. Mustafa Sultan Enterprises L.L.C., a reputed company owned by the Mustafa Sultan Group in Sultanate of Oman is one of the prominent technology leaders and has diversified businesses in premium electronic products, lighting solutions, office automation technologies, industrial products, and information and communication products, backed up by world class services. Voltas Limited has executed several prestigious projects in India, South East Asia and Middle East and through the joint venture with Mustafa Sultan Group, leveraged its vast experience, track record and expertise in the MEP field to opportunities for similar large value MEP Projects in the Sultanate of Oman. On December 20, 2010, a joint venture agreement was signed between Voltas Ltd and Olayan Financial Company, Riyadh to form JV in the Kingdom of Saudi Arabia. Voltas Limited has executed several prestigious projects in India, South East Asia and Middle
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East. Through this joint venture with Olayan Financing Company, Voltas got an opportunity to leverage its vast experience, track record and expertise for MEP Projects in KSA. On March 19, 2011, Voltas group and KION Group joined forces in India. KION is the sixth global brand and the JV announced was for material handling equipment. This made Voltas expand their market position in an attractive growth market. It also brought about a change in the business technology leadership. The JV was intended to make full advantage of the potential of Indian Market. The Voltas brand continued to expand its product range, particularly in the warehouse equipment sector. The partnership ensured long-term sustainability and positioning in the Indian forklift truck market. This was also to consolidate its leading position in India. In the year 2006-07 when company’s market positioning in air conditioning was under threat from the MNCs but the turnaround story came about when the company pioneered power-saving air conditioners for the value-conscious Indian consumer. The Unitary Products Business group also restructured its supply chain, cutting costs ruthlessly and instilling a sharp profit focus among its entire team. The strong consumer response to the new value proposition enabled Voltas to increase market share steadily. The larger sales volumes and leaner cost structure generated the margins required to wipe out the division’s accumulated losses; today, the business contributes substantially to the company’s bottom line. Today the company is applying the experience gathered earlier to redefine its goals to create a new engine for growth in the coming decade. The goal of profitable growth has been firmly established. Voltas has decided that they are not going to define themselves only by numbers, any more. They also need to also change the work culture in our company. The company believes that these new values and behavior will help the company respond with agility to new opportunities and challenges in a fast-changing world. And the desired culture is embodied in the acronym Swift — smart thinking, winning attitude, initiative and innovation, flexibility, and team work. The company is expanding its electro-mechanical projects and services business, hitherto focused on buildings (offices, hospitals, hotels and malls), to the industrial sector. The focus is also on expanding the air conditioning business and taking it to its full potential, given the increasing income levels in the country. Voltas is also concentrating on the textile machinery business, which is expected to see a significant upturn in the coming months. The company has already built up a strong reputation for electro-mechanical work on iconic project sites in the Gulf market and is now stepping up the pace in the region. A team from the mining and construction equipment division of Voltas is exploring opportunities in Mozambique. The objective is to develop a business model for leveraging Indian technical skills in the maintenance of high value equipment, work that Voltas has been doing in India for decades.
Sources: www.tata.com www.voltas.com www.aiacra.com (All India Air Conditioning and Refrigeration Association) www.moneycontrol.com
doc_995478676.docx
Documentation is about company analysis of voltas ltd.
Voltas Ltd, one of the leading companies from Tata Group is one of the world’s premier engineering solutions providers and project specialists. It caters to huge cache of industries like 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. Voltas is India’ premier company in Air conditioning and Refrigeration industry and hence, I would like to bring up my industry analysis on the Air conditioning and Refrigeration industry. Industry Analysis: 1. Industry trends: Indian and Global perspectives, recent happenings The industry mainly revolves around the fact where people need more comfort as compared to the previous times. One of the concepts of air conditioning centralized heating started as early as third century BC. In the eight century as well, centralized cooling was seen at Baghdad during hot summers where people used ice between their walls to get a cooling effect. In such ways, an industry has been developed which uses different technologies and has gone through various environmental changes. The technology in the industry is constantly changing. Hence, every company in the industry is taking into account the continuously changing technology trends and keeping itself updated. A lot of R&D work is also being done. As the Asian and African continents are also seeing a rise in their income levels, energy needs are increasing and hence, it is having an effect on the industry. There are equipments needed which would consume less power and hence, new technologies need to be updated. The emphasis on green technology makes it very important for the industry to come up with new technologies which has its carbon emissions under a limit specified by the UN. There should be less of energy guzzling products. Carbon footprints need to be reduced. The industry has been working on the same. The size of the industry in India was $3 billion USD as of FY 2008-09. Some latest statistics about the industry has been mentioned below: Air conditioning Systems • Growth during last 5 years : over 20% Present penetration level is barely 3% • Expected growth during medium term (3~5 years) : 15~20% Segment-wise growth rate trend: • Room air-conditioners : 20% • VRF systems : 40% • Chillers : 10% • Ducted/package : 10% • Others (precision/telecom) : 25~30% Commercial Refrigeration Sector
• Growth during last 5 years : ~10% • Expected growth during medium term (3~5 years) : 10~12% Segment-wise growth rate trend : • Water Dispensers : 20% • Storage Water Coolers : 05% • Display/storage equipment : 15% The domestic growth in the sector has also seen increase in volumes because of increased heat and high wages.
2. PEST Analysis: Political, economic, social and technical aspects related to the industry
Political: Standards based on technical considerations and the decision taken by the governing bodies of the industry are beneficial for the society but when it comes to politics meddling with the industry in terms of protectionism, it is an issue for the industry. Economic: The industry is affected by price control, taxation, regulation and deregulation, labor intensity and capital control from the Government. This leads to an effect on the way the industry operates. The Indian economy is growing at a constant rate and hence, there is a good demand in the industry. Technology needs to be constantly updated and for this, import of technology is needed. Hence, exchange rates have an effect on the industry. Social: Due to increasing standard of living, the demand continues to be there for products and service from the industry. The increasing youth also demands for comfort and other refrigeration devices. The focus for refrigeration of various items is also increasing due to increasing busy lifestyle, hence the increase in demand. Safety is also an important consideration now hence, the need for technological upgrade and greener devices. Technological: The rate of technological change is high in the industry as new standards are being set up for greener devices and less energy guzzling devices. Due to this, R&D activity is also high due to lower carbon footprints in the industry. The need for refrigeration of food products is also high in the industry. Hence, new ways in technology need to be seen in order to improve the ways in which the food can be saved from rot.
3. Competitor Analysis: Analyze pricing, quality, distribution and partnerships of the nearest competitor of the company
Bluestar is the nearest competitor to Voltas in the Air Conditioning and Refrigeration industry. It mainly dominates in the domestic sector as most of its clients are from sectors such as hospitals, education and power. That in a way has decreased dependency on the global environment which looks very bleak right now whereas in the case of Voltas, 70% of the projects which it undertake are international ones. Due to the recent US recession and Euro crisis it is creating issues for Voltas. Bluestar initially had a tie up with York in the mid 1980s.With the learning experience it leveraged from the tie up , it started to manufacture its own Chillers. Blue Star has had a tie up with Kolpak, USA for coldrooms. It also had tie up with Heat Craft for Freezing Units. Technical support and technical expertise was provided by Rheem, USA for building world class Dadra manufacturing unit. The entry into precision equipment business was achieved with support from Eaton Williams. Now it is into manufacturing of Precision Packaged Control Units. Blue Star also has a huge and strong network of suppliers. For distribution of the products, Blue Star has around 180 system dealers who deal exclusively in businesses of packaged air conditioning and cold rooms. These dealers are provided high technical expertise, installation and service competence. A large network of approximately 600 dealers is for room air conditioners and refrigeration products which are easy to install. The products are created with world class methodologies and technologies. Blue Star tries to make its products energy efficient. The pricing of Blue Star is at par with the products of other competitors but the service which they provide is better than those of its competitors.
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the industry
Strengths: 1. 2. 3. 4. It is a fully modernized industry. The industry has internationally compatible products. It has the capacity to produce more than 400000 units annually. It has the potential to create a complete range for central air conditioning system of textile industry.
Weaknesses: 1. Manufacturing units are under utilized in terms of its capacity. 2. The cost of production is very high due to expensive technology. 3. Regulatory approval from environmental board is a big hurdle.
Opportunities: 1. There are huge opportunities to penetrate into the Middle East and African continent. 2. Domestic industry is also to be fully explored and utilized 3. FDI in retail could bring about an organized way of business and hence, development of infrastructure. This can be an opportunity to increase the volume of sales. 4. Conversion of window air conditioning systems to split air conditioning and centralized air conditioning is a huge opportunity which can be cashed in. Threats: 1. Cheap Chinese brands entering into the local market are a huge threat for the existing industry players. It also affects the quality of the products. 2. The items which are smuggled into the market. 3. New world trade order of open trade.
Company Analysis
1. Company description (a brief introduction regarding what businesses the company is into) Voltas Ltd, one of the leading companies from Tata Group is one of the world’s premier engineering solutions providers and project specialists. It caters to huge cache of industries like 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. Voltas’s strength lies basically in the following: a. Execution of electro-mechanical projects. It is one of the top companies in the air conditioning and refrigeration industry. b. Design and manufacture of industrial equipment, cooling appliances and materials handling requirement. c. Installation, servicing and sourcing of diverse technology based systems. Voltas’s operations have been divided into 3 main clusters: a. Electro-mechanical projects and services. b. Engineering products and services. c. Unitary Cooling products. Voltas has had projects for air conditioning at the world’s tallest building Burj Khalifa and the world’s biggest ocean liner, the RMS Queen Mary 2.
2. General information about the company: location of the headquarters, year of founding,shareholding pattern, number of employees, top management, etc.
Voltas is headquartered in Mumbai, India. Its zonal headquarters are located in Mumbai, Chennai, Kolkata and Delhi. It has its branch/area offices located in Ahmedabad, Baroda, Bangalore, Calicut, Coimbatore, Chandigarh, Delhi, Ghaziabad, Indore, Jaipur, Jamshedpur, Kochi, Kolhapur, Lucknow, Ludhiyana, Madurai, Panjim, Pune, Secunderabad, Surat, Tirupati, Tirupur, Vijaywada and Visakhapatnam.
The overseas offices are present in UAE (Abu Dhabi, Dubai), Bahrain, Qatar (Doha), Kingdom of Saudi Arabia (Jeddah) and Singapore It has its factories located in Thane (Maharashtra), Dadra (Union Territory) and Pantnagar (Uttaranchal). Voltas was founded on 6th September 1954 at Mumbai by M/s Volkart Brothers and Tatas. The shareholding pattern in the company as per 30th June 2012 has been described below: Name of the shareholder TATA SONS LIMITED TATA INVESTMENTS CORPORATION LTD EWART INVESTMENTS LIMITED THE TATA POWER COMPANY LIMITED LIFE INSURANCE CORPORATION OF INDIA ICICI PRUDENTIAL MUTUAL FUND & ASSET MANAGEMENT GOVERNMENT PENSION FUND GLOBAL EASTSPRING INVESTMENTS INDIA EQUITY OPEN LIMITED MERRILL LYNCH CAPTIAL MARKETS ESPANA S.A S.V LIC OF INDIA MARKET PLUS 1 GROWTH FUND GENERAL INSURANCE CORPORATION OF INDIA THE NEW INDIA ASSURANCE COMPANY LIMITED FRANKLIN TEMPLETON INVESTMENT FUNDS BRITISH COLUMBIA INVESTMENT MANAGEMENT CORPORATION A/C EMERGING MARKETS EQUITY FUND ICICI PRUDENTIAL DISCOVERY FUND Percentage of shares held 26.64 2.86 0.58 0.07 13.89 7.17 5.44 1.84 1.79 1.74 1.45 1.18 1.06 1.04
1.01
The number of employees currently at Voltas stands at 3600.
The top management officials at Voltas are given below:
1. Board of Directors Chairman : Ishaat Hussain Managing Director : Sanjay Johri
Director : Nasser Munjee N N Tata Jimmy Bilimoria S N Menon Nani Javeri R. N. Mukhija Vinayak Deshpande
2. Corporate Management Managing Director : Sanjay Johri President : A.K. Joshi
Executive Vice President -Corporate Affairs & CFO: Anil George Executive Vice President & CHRO: Emmanuel David Executive Vice Presidents & COO: M. Gopi Krishna Shaukat Ali Mir Pradeep Bakshi
3. Financial performance of the company: Sales, net profit, segment wise performance of the past 1 year ? ? ? ? ? Despite the challenging economic slowdown and uncertainties. The consolidated income from Voltas’ operations almost remained the same. It was Rs 5175 crores as compared to last year’s 5177 crores. The high interest rates, inflation, increase in prices of raw materials and commodities had an adverse effect on the operating profit this year. The profit reduced from Rs. 484 crores of last year to Rs. 370 crores this year. It reduced by 23.55% Y-O-Y. The profit before tax reduced from Rs. 524 crores of last year to Rs. 219 crores of the current year. It saw profit before tax reducing by huge 58.2 %. The net profit reduced from Rs. 352 crores of last year to Rs. 162 crores of the current year. It saw profit before tax reducing by huge 53.97 %. Voltas’ board also announced a dividend of 160% in FY 2011-2012. Segment wise performance of Voltas has been given below: 1. Electro-mechanical projects and services: Electro- mechanical projects and services saw a jump in the revenue at Rs. 3183 crores as compared to Rs. 3041 crores last year. However, the profitability reduced due to onerous contracts and exceptional items. The profit stood at Rs. 172 crores this year as compared to Rs. 239 crores last year. Due to the onerous contract, there has been significant upward revision in the estimated cost due to changes and delay in execution. The onerous contract has been due to the project of Sidra Medical Research Centre and Hospital at Qatar. It involves a lot of coordination between different agencies placed at the execution of this project. Voltas’ share of work has been pegged at Rs. 1000 crores but then the changes in the requirements by the clients is delaying the project execution. However, the claims have been made due to increased costs but still uncertainties remain over the payment of these additional revenue claims. Domestic project business performed well and recorded high turnover. Despite the prevailing economic conditions in the country, the electro- mechanical projects and services in the domestic industry has been able to maintain the gross profitability. The order book of the segment stood at Rs. 4292 crores this year as compared to last year Rs. 4888 crores. 2. Engineering products and services: The revenues, results and capital employed for the current year are not comparable to this year due to the transfer of Material Handling business. While the textile business has performed well on the strength of large order book, the performance of mining and construction business has been impacted by high interest rates and environmental issues. Engineering Products and services business was affected also due to global industry consolidation and takeover of some of the major principals of Voltas. Revenues this year
stood at Rs. 412 crores this year as compared to Rs.562 crores last year whereas the profit saw a dip from Rs. 103 crores last year to Rs. 62 crores this year. 3. Unitary cooling products for comfort and commercial use: Despite the unfavorable climatic conditions, subdued consumer sentiments and intense competition, Voltas maintained no 2 market position in Unitary cooling products business. The segment’s revenue dropped by 1% and was Rs. 1539 crores as compared to the last year of Rs. 1561 crores. The profit was seen at Rs. 130 crores this year as compared to Rs. 160 crores of last year.
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the company
Strengths: 1. Management and execution of electro-mechanical projects which includes air conditioning and refrigeration projects. 2. Design and manufacturing of industrial equipment, cooling appliances and materials handling equipment. 3. Sourcing, installation and servicing of diverse technology based systems serving Indian industry through representation of global technology leaders. 4. Voltas has a model Tata Business Excellence Model (TBEM) to improve business performance, bringing about a common platform for people to share their knowledge, follow the best business practices and pursue excellence across all functions. This enables them to get continuous and measurable assessment of improvement in several internal processes that leads to improvement in financial performance and great customer and stakeholder satisfaction. 5. Public work projects have been one of the strengths of Voltas. 6. Voltas is strong in its domain and the domain knowledge is also very strong. 7. Voltas’s sales and service network is very trusted across the industries it operates in. 8. It is committed at providing lifelong support for its products and services. 9. Voltas has a very good code conduct in place for all its employees including the senior management officials through which they come to know that what is required out of them to make the company successful. 10. Voltas is also strong at business ethics and values. 11. Voltas is also famous for its green mission through that it uses the best technologies to make its products and services less energy consuming and more efficient with respect to the environment. This is a very important in today’s world where there is a lot of
emphasis on environment. This helps to make them one of the global leaders in their respective industry. 12. Voltas has also worked on huge projects like air conditioning of the tallest building Burj Khalifa and the world’s biggest ocean liner, the RMS Queen Mary 2. Weaknesses: 1. Voltas is very dependent on its parent company hence, the business leadership aren’t able to take the independent decisions. Dependence also creates a problem where if the parent company fails irrespective of however good the business of Voltas would be doing, it will not be good for the company. 2. Voltas is not that proficient at its after sales service as compared to its other competitors like BlueStar, etc. 3. Voltas also needs to build up on its branding in the industry through use of better advertising strategies. 4. Voltas’s presence is more in the international market whereas only 30% of the projects are domestic. So, it needs to build up on the domestic market which is dominated by its competitors. 5. Voltas doesn’t target the mass market. 6. Voltas need to be less dependent on global projects because the economic scenario isn’t looking great for the business. Opportunities: 1. Voltas can target the Indian mass market through which it can increase its revenue and hence, profitability of the business. 2. To increase the market share and revenue, the high end value driven proposition will help. 3. It should use its strength of product differentiation more. 4. The constantly changing dynamics of the behavior of consumers present a good proposition for the company to invest in. 5. Infrastructure needs to be developed in India and other developing countries to a great extent. Voltas can use this opportunity in its favor. 6. The excise duty reduction has made the business environment and prospects more favorable for the industry. 7. The energy conservation building code is a great opportunity for Voltas. Threats: 1. Inflation is a huge threat as the raw material costs increase and hence, decreases the profitability of the business. 2. The slow growth and high fiscal deficit of Indian economy is also a threat. Due to high fiscal deficit, interest rates will be high and hence, there will be less investment and cost of money will also be high. Government will also not undertake development projects or infrastructure projects which can have a huge bearing on the business.
3. Major international players of the same industry are giving huge competition to Voltas’s market share and revenue. 4. Currency fluctuations can also have a huge bearing on the profit making of the company because of costlier technology and raw materials. 5. Companies in the domestic industry are also giving a huge competition with their low cost products and better service. 6. Due to the slower growth of the economy, there is also a decrease in the sales of consumer durables goods which could take a toll on company’s revenues. 7. Indian mass market may also be captured by the rival companies LG, Samsung, Videocon, etc.
5. Various strategies employed by the company in the course of conducting business (in the form of alliances, joint ventures, product innovation/ expansion strategies, acquisitions/ divestitures and any such strategies that you think may affect the business of the company) in past 2 years.
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On the 26th of February 2010, A K Joshi, the president of Voltas’ Electro-Mechanical Projects & Service business was elected as the president of RAMA ((Refrigeration & Air conditioning Manufacturers’ Association), India’s only apex body for manufacturers in the industry. RAMA is an active force and this helps Voltas in having huge influence on the issues of government policy, customer focus and trade. Voltas’ focus is in the Green technologies and RAMA too has a focus area of product upgradation for more eco friendliness. This helps Voltas spread its wing in the industry and a force to reckon with. On May 31, 2010, Voltas announced its Memorandum of Understanding between Sultan Enterprises L.L.C, Muscat, Sultanate of Oman for JV operations for execution of electromechanical (MEP) projects in Sultanate of Oman. This facilitated Voltas’ entry in the MEP segment in Sultanate of Oman. Mustafa Sultan Enterprises L.L.C., a reputed company owned by the Mustafa Sultan Group in Sultanate of Oman is one of the prominent technology leaders and has diversified businesses in premium electronic products, lighting solutions, office automation technologies, industrial products, and information and communication products, backed up by world class services. Voltas Limited has executed several prestigious projects in India, South East Asia and Middle East and through the joint venture with Mustafa Sultan Group, leveraged its vast experience, track record and expertise in the MEP field to opportunities for similar large value MEP Projects in the Sultanate of Oman. On December 20, 2010, a joint venture agreement was signed between Voltas Ltd and Olayan Financial Company, Riyadh to form JV in the Kingdom of Saudi Arabia. Voltas Limited has executed several prestigious projects in India, South East Asia and Middle
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East. Through this joint venture with Olayan Financing Company, Voltas got an opportunity to leverage its vast experience, track record and expertise for MEP Projects in KSA. On March 19, 2011, Voltas group and KION Group joined forces in India. KION is the sixth global brand and the JV announced was for material handling equipment. This made Voltas expand their market position in an attractive growth market. It also brought about a change in the business technology leadership. The JV was intended to make full advantage of the potential of Indian Market. The Voltas brand continued to expand its product range, particularly in the warehouse equipment sector. The partnership ensured long-term sustainability and positioning in the Indian forklift truck market. This was also to consolidate its leading position in India. In the year 2006-07 when company’s market positioning in air conditioning was under threat from the MNCs but the turnaround story came about when the company pioneered power-saving air conditioners for the value-conscious Indian consumer. The Unitary Products Business group also restructured its supply chain, cutting costs ruthlessly and instilling a sharp profit focus among its entire team. The strong consumer response to the new value proposition enabled Voltas to increase market share steadily. The larger sales volumes and leaner cost structure generated the margins required to wipe out the division’s accumulated losses; today, the business contributes substantially to the company’s bottom line. Today the company is applying the experience gathered earlier to redefine its goals to create a new engine for growth in the coming decade. The goal of profitable growth has been firmly established. Voltas has decided that they are not going to define themselves only by numbers, any more. They also need to also change the work culture in our company. The company believes that these new values and behavior will help the company respond with agility to new opportunities and challenges in a fast-changing world. And the desired culture is embodied in the acronym Swift — smart thinking, winning attitude, initiative and innovation, flexibility, and team work. The company is expanding its electro-mechanical projects and services business, hitherto focused on buildings (offices, hospitals, hotels and malls), to the industrial sector. The focus is also on expanding the air conditioning business and taking it to its full potential, given the increasing income levels in the country. Voltas is also concentrating on the textile machinery business, which is expected to see a significant upturn in the coming months. The company has already built up a strong reputation for electro-mechanical work on iconic project sites in the Gulf market and is now stepping up the pace in the region. A team from the mining and construction equipment division of Voltas is exploring opportunities in Mozambique. The objective is to develop a business model for leveraging Indian technical skills in the maintenance of high value equipment, work that Voltas has been doing in India for decades.
Sources: www.tata.com www.voltas.com www.aiacra.com (All India Air Conditioning and Refrigeration Association) www.moneycontrol.com
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