Azad Engineering whole-time director Vishnu Malpani said the company is well positioned to achieve 25-30 percent of its sales target this fiscal year after the Rolls-Royce deal. The Hyderabad-based company is making several strategic changes and investments in a new plant to produce critical components for Rolls-Royce’s defence platforms.
In January, the company signed a long-term contract with Rolls-Royce to manufacture and supply defense aircraft engine parts. The British luxury car maker is also a leading engine manufacturer for the military transport market.
Malpani said the company is undertaking the ambitious project as part of a long-term contract with the major corporate.
“We have signed a contract with Rolls Royce for defence platforms and we are working on manufacturing some very critical components which will be coming to India for the first time. This is a long-term contract and it is currently in development. We are building a dedicated factory for Rolls Royce and will start the development process over the next one year and will start delivering most of these critical components by next year,” Malpani told NDTV Profit.
Malpani added that the new plant is part of a broader investment plan backed by funds raised in the company’s recent IPO. “The investment is part of the Rs 2,400 crore raised in the IPO. Around Rs 1,000 crore will be put towards infrastructure and supporting factories being built for customers, and Rs 2,000 crore will be used to create capacity to meet forecasts for the next two years,” he said.
Malpani said the growth prospects are achievable in the long term after the Rolls-Royce deal.
“We have given a guidance of 25-30 per cent as we believe it is achievable in the long term. Internally we aim to exceed this number but our market guidance is set at 25-30 per cent. In terms of margins, we have remained consistent, be it EBITDA or PAT. Our EBITDA has been consistently in the range of 34-35 per cent and we expect it to remain in the range of 33-36 per cent for the time being,” Malpani said.
He emphasized the importance of the partnership, saying, “We see our relationship with Rolls-Royce as going to be very important over the next few years. If you look at the growth with GE and Mitsubishi, the aerospace industry is vast, so we expect Rolls-Royce to have a similar trajectory, or even greater.”
Talking about the company’s growth direction over the next five years, Malpani said, “We have adopted a 5C strategy internally — customers, contracts, capacity, capability and consistency. Our growth strategy is built around these 5Cs and investments in operations, plant, machinery and infrastructure are aligned with the evolution of each of these parameters.”
“Currently, we serve the energy industry with gas, nuclear and steam turbines. We are approved by EDF (Electricité de France), which manages France’s main nuclear power plants. Aerospace contributed around 20% of our revenue during the quarter. Further, our oil and gas segment, which is also certified, is expected to grow significantly,” Malpani added.
Malpani said the company will be able to show multi-fold growth this year and next fiscal as well, with similar growth in the oil and gas segment.
