Company proposes Rs760-crore modernisation plan to fuel growth
Ranchi-based Heavy Engineering Corporation (HEC), which basically caters to the steel and coal sectors, looks for a technological upgrade to propel its growth. The corporation has submitted a R763-crore plan to the department of heavy industries for the modernisation of the installed plant & machinery which has now become obsolete.
There has been no capital investment in HEC in the last 40-odd years, which has the company running on outdated technologies. The efficiency of most plant & machinery has come come down to 40%, leading to frequent breakdowns. Unavailability of spares has further complicated things for the company.
An electric arc furnace (for melting metals) installed in the company long ago today takes 7-8 hours for each heat, whereas a new-tech arc furnace would take only around 80-90 minutes. This way the company is losing out hugely on productivity since, as compared to only one heat being achieved in a shift today at the company?s furnace, a modern arc furnace is capable of carrying out at least five heats during the same time (in a shift). Likewise, other plant & machinery in the company too needs urgent renovation or upgrade.
?Unless investment is made on an urgent basis in new-tech plant & machinery there is no possibility of the company?s turnover showing an annual 25%-30% increase, which the company is looking forward to,? said R Misra, chairman and managing director of HEC.
It is estimated that in order to survive on a long-term basis, HEC has to achieve a net profit of at least R100 crore against the current net profit trend of R12.21 crore and R8.58 crore, achieved in 2011-12 and 2012-13.
Incorporated in 1958, HEC, after several years of running in losses, earned a profit of R2 crore in 2006-07 on a turnover of R304 crore and has since been in the black.
?We have sent a R763-crore tech-upgrade proposal and also filed a pre-feasibility report with the department of heavy industries. Apart from renovation /upgradation of plant & machinery, use of LPG, instead of coal, would also result in a paradigm shift once the capital infusion took place,? Misra told FE.
Misra is hopeful of a favourable decision from the government in the current fiscal.
?I am optimistic that HEC?s proposals would be approved by the government of India by December this year or at least before March next year, as several departments are involved. Once the investment is in place, HEC?s turnover could double to around R1,500 crore from the R739 crore it achieved in
2012-13?, Misra said.
HEC?s order book as on April 1, 2013 stands at R1,500 crore. The company has set a turnover and net profit target of R1,001 crore and R40.71 crore respectively for the current financial year. ?HEC can become a disinvestment candidate in two years? time from completion of the proposed capital expenditure, which is expected to be over by the last year of the 12th Five-Year Plan,? Misra said.