Triveni Engineering & Industries (TEIL) is demerging its wholly-owned steam turbine business into a separate company. The move will help it raise funds from strategic partners for the demerged unit as the sugar business would have dissuaded a large company to invest in a diversified company. TEIL with revenues of over Rs 1,800-crore is engaged in the business of manufacturing sugar, steam turbines besides projects and engineering activities.
Currently, the steam turbine business is under a wholly owned subsidiary Triveni Turbine (TTL). As a part of the demerger, TTL will issue one share of Re 1 for every one share held in TEIL.
The company’s steam turbine division, established in 1968, manufactures steam turbines of up to 30 mega watt capacity. Triveni has over 2,000 installations in India and 30 other countries.
For the year ended September’09, the company generated Rs 489 crore or a quarter of its total revenues from turbines business. The turbine business, however, had better margins and contributed around 30% of total profits.
Although currently sugar business is generating high profits as the commodity is on an upward cycle, since fortunes of sugar business is linked to government policies and swings wildly, it is seen as a drag for the company. A demerger of more consistently performing trubine business will allow the new company to raise money for expansion.
In October 2007, Triveni Engineering had inked a deal with GE to make compressors for the oil and gas industry in India. Under the deal, Triveni was to import bare compressors from GE oil and gas business’ US facility and will design and assemble high-speed reciprocating compressors in Bangalore. The deal was for an initial term of five years.