India's Voltas Signs Joint Venture Agreement with Oman's Mustafa Sultan Enterprises

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Researched by Industrial Info Resources (Sugar Land, Texas)--Voltas Limited (BSE:500575) (Mumbai), a leading engineering services and air conditioning company that is part of the $71 billion Tata Group of Companies (Mumbai), has signed a joint venture agreement with Oman's Mustafa Sultan Enterprises (MSE) (Muscat, Oman). The joint venture company, Voltas Oman LLC, will cater to electro-mechanical and public health projects in Oman. As per Oman's joint liability laws, Voltas Limited and MSE will hold 65% and 35% stakes, respectively, in this venture. After the share allocation is completed, Voltas Oman LLC will operate as a subsidiary of Voltas Limited. The joint venture is likely to begin operations shortly.

Akber Mustafa Sultan, the managing director of MSE, said that the joint venture will leverage operational efficiencies, common business interests, and the excellent project management and design capabilities of both companies. The joint venture has been established at a time when Oman is witnessing a boom in infrastructure and construction activities.

MSE is a leading technology services provider in Oman. The group provides services for lighting; office equipment; electrical, communication and industrial products; and security. MSE operates more than 13 companies that provide solutions to customers in real estate, communication, logistics, technology, construction, infrastructure and processing industries.

Established in 1953, Voltas is India's leading air-conditioning services provider and the largest exporter of electro-mechanical equipment and solutions. The company provides state-of-the-art services in heating, refrigeration, building management, electro-mechanical, ventilation and cold chain services to customers in more than 30 countries. The group provides services and solutions to customers in the information technology, communication, real estate, steel, power, hospitality, education and food processing sectors. For the fiscal year 2010-11, Voltas has announced a capital expenditure outlay of between $1.08 billion and $1.29 billion. The company has three heating, ventilating and air conditioning (HVAC) equipment-manufacturing facilities that are at Dadra, in the Union Territory Dadra; Nagar Haveli, Thane, in Maharashtra; and Pantnagar in Uttarakhand. The company also operates two Indian and four international subsidiaries.

In a related development, Voltas' net operating profit grew by 51% to $83.3 million from the same period last year. The growth has been attributed to large-scale international electromechanical projects, especially in Singapore and the Middle East. The total revenue also increased 10% to $1.05 billion. The revenue of Voltas' electromechanical segment surged 13%, mainly due to projects in the Middle East, including the Formula1 track and Eithad complex in Abu Dhabi, and the Burj Khalifa complex in Dubai. Presently, the electromechanical business group, which is one of the biggest revenue contributors to Voltas, has an order book valued at $1.02 billion.

Industry analysts have observed that despite revenues of engineering and services sector declining due to the economic slowdown, Voltas' electromechanical and unitary cooling business segments recorded impressive growth. M.M. Miyajiwala, the chief executive officer of Voltas Limited, said that sales of unitary cooling products and refrigeration grew 30% and 25%, respectively, spurred by the growing consumer durables demand in India. Presently, the company's cash reserves are about $45.44 million in India and in the range of $86.56 million to $108.2 million in the Middle East. Overseas sales and operations contribute about 41% to the company's total revenues.

Recently, Voltas secured a contract to provide electromechanical services including plumbing, HVAC, and electrical and drainage systems for the Netaji Subhas Chandra Bose International airport at Kolkata, West Bengal. The company is also executing projects in electrical and fire-security systems and HVAC, as part of the expansion of Chennai's international airport. Earlier, Voltas successfully completed projects at the Rajiv Gandhi International airport in Hyderabad, Andhra Pradesh.

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