>VOLTAS (CITI)

Key Takeaways From Business Update

■ Voltas published a business outlook update recently. Given below are key takeaways.

■ Electromechanical segment - largely status quo – Domestic market has been subdued-new inquiries; tendering and execution of orders have been muted. However, liquidity seems to be easing; would help working capital. Current domestic orderbook is Rs13bn. International orderbook of Rs35bn is to be executed by Sept 2010.

■ Engineering Agency and Services- to show improvement in H2FY10E- Mining and Construction segment has suffered due to low commodity prices and lack of finance. Recent signs indicate that the third party financiers for equipment have adequate liquidity. Overall, Voltas believes that the engineering businesses will start showing improvement in the H2FY10E, while H1FY10E will remain sluggish. Overall it expects FY10E to be flattish in terms of growth while
FY11E could be strong for the business.

■ Commercial Cooling Products business- Seeing volume growth - Improved consumer sentiment and severe summer have helped volume growth. Secondary sales, i.e., sale by dealers/retailers to the final consumer, of ACs have grown. Overall AC volumes are estimated to have grown a little less than 10% in Q1FY10E; Voltas is estimated to have grown more than the market. Primary sales have been subdued because of stock out situations due to conservative inventory planning. Local mfg. is gaining vis-à-vis imports due to rupee value - a good sign for its subsidiary. Inventories have been liquidated.

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