Reliance Cap takes 26% in transformer co

MUMBAI: Betting on the buoyant transformer business in the country, Reliance Capital, through its private equity arm, has acquired 26% stake in Victory Transformer & Switchgear Ltd (VTSL), a fully integrated transformer manufacturing company, at a cost of Rs 75 crore.

VTSL is a Hyderabad-based company, promoted by Vaddineni Venkatappaiah Naidu in 1996. It is currently managed by, his son, Mahindra Vaddineni.

In the past, Reliance ADAG has shown an appetite for transformer companies, and a couple of years ago, the group acquired a little over 5% in Emco Transformers through various associate investment companies. A Reliance ADAG spokesperson confirmed the development, but declined to share more detail.

VTSL primarily manufactures power transformers, but it is vertically integrated and manufactures related products like unitised substation, transformer core, vacuum circuit breaker, insulators and transformer oil. The company supplies to State Electricity Boards across the country and to major EPC contractors.

According to analysts tracking the sector, the transformer business is expected to thrive in the backdrop of the government’s plan to enhance generating capacity to over 2,00,000 MW by 2012, which is an additional generating capacity of 71,568 MW from the current capacity.

Analysts say that for every megawatt of generating capacity being added, an additional requirement of 8 MVA transformer capacity is needed.

VTSL’s prospects can be seen in this context. Its revenues have grown at a compounded rate of 89% per annum over the last 2 years and it has an order book of over Rs 200 crore.

The company is raising funds for expanding its existing transformer capacity and is considering acquisitions in the near future. Turnover is expected to reach Rs 225 crore during the current financial year, and the company is seen maintaining high double-digit growth in future.