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Equitymaster India

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With the worldwide acquisition of Alstom's T&D (transmission and distribution) business by Areva (French nuclear major), the name of the company was changed to Areva T&D (ATD) in September 2005. Along with Siemens Limited and ABB, ATD is among the top three T&D (transmission and distribution) players in India. The company's product portfolio includes switchgears, transformers and reactors, motors and energy meters.

During 1HCY09, ATD recorded a 45% YoY growth in revenues on account of its successful performance in utilities and industrial areas. Though its operating margins did not fare as well, with the same falling from 17.8% in 1HCY08 to 13.2% in 1HCY09 due to severe pricing pressure. On the back of the contraction in operating margins, substantially higher interest expenses and higher depreciation charges on the back of commissioning of its new factories, ATD’s net profits recorded a fall of 15% YoY during 1HCY09.

At the end of June 2009, the company’s order backlog stood at Rs 42 bn (1.6 times its CY08 net sales). ATD managed to maintain its leadership in the extra high voltage segment of the transmission and distribution (T&D) business by winning 4 major orders from Power Grid Corporation for delivery of 765 kV substations. The company’s dull performance during the recent period due mainly due to the fact that pricing too took a beating. The company has seen about a 15% to 20% fall in pricing in its transmission segment since the start of 2009. The distribution segment has seen an even more severe decline with prices falling by about 25% to 30% in this segment. One of the main reasons for this fall in prices was a certain amount of panic amongst competitors in the face of the slowdown and recessionary prices, which lead to an erosion in pricing. Going forward, the company is looking towards aggressive expansion in the extra high voltage domain.