Recently, Godrej Process Equipment (GPE) acquired 100 year old Yuba and Ecolaire brands from SPX Heat Transfer significantly augmenting its engineering capability to serve power sector customers. According to Allen Antao, Executive VP and Business Head, GPE, availability of world-class fabrication capabilities and large pool of engineering talent have helped India to emerge as a key destination for sourcing of pressure vessels, reactors, heat exchangers and other critical equipment. In conversation with Rakesh Rao, Allen Antao explains how process equipment industry is changing globally opening up new areas of opportunities for India, in general, and GPE, in particular.

 

What is the significance of acquiring Yuba & Ecolaire brands to Godrej Process Equipment (GPE)?

With this acquisition, Godrej will be capable of providing end-to-end solutions in the field of heat exchange auxiliaries in the power generation sector. Godrej Process Equipment was already producing feed water heaters using Yuba design and technology. Now, by acquiring the brand, Godrej has direct ownership of the technology. Using Yuba technology, Godrej has supplied feed-water heaters in the past to various power producers like Nuclear Power Corporation of India Ltd (NPCIL), Tata Power, Gujarat State Electricity Corporation, NTPC, among others. GPE will be manufacturing heat exchange auxiliaries, mainly feed-water heaters and surface condensers, at the Mumbai facility as well as in Dahej, Gujarat. 

 

In terms of orders, are you seeing a sustained rise in the last few years?  

We are seeing several greenshoots of demand for critical static equipment around the world. India too is seeing a significant increase in investments in the fertiliser sector with several mega projects on the anvil in the refining space. Though the power sector has lagged its own potential, we expect that long-term story to be intact going forward. 

 

Rising oil prices give reason for optimism that demand in the oil & gas, petrochemicals & fertilisers sector will only grow. The focus in renewable in the power sector will not dampen investments in thermal power space as that will continue to retain the dominant position in the power mix in the country for several more years to come. This is a scenario that augurs very well for us, one in which we see large scale potential for us to grow and expand our equipment business.

 

Kindly highlight some of the key trends observed in the process equipment industry in India. 

India is a key destination for sourcing of pressure vessels, reactors, heat exchangers and other critical equipment used in process plants. Not only fabrication capabilities and capacities, but the large pool of engineering talent has prompted some of the biggest global names to open up offices and design houses in India. This makes India a one stop global powerhouse in the process equipment engineering and manufacturing space. 

 

Indian companies have invested in modernising their facilities, harnessed the use of the latest technologies, built people competencies, focused on skill development and made quality, on time performance, safety and sustainability the key drivers of their businesses. This provides businesses with the cutting edge over their global competitors. 

 

Demand growth is helping companies recover their investments at a faster rate and thus allow for reasonable profitability too. Large investments are being made in India alone by our domestic oil companies as also large investments in the nuclear power space forms the basis of the optimism that India’s manufacturing readiness coupled with this increased demand will allow the process equipment industry in India to report very robust financial performance in the years ahead. One area of concern with serving domestic demand is the sharply depreciating Rupee against the Dollar and the rising prices of steel.

 

Refineries are upgrading to produce BS VI fuel to meet the government mandate. Against this background, what kind of opportunities are you looking at?  

With refineries moving to upgrade their capacities to produce BS VI fuels, there is already a surge in demand for equipment to fulfill these revamp and upgradation needs. Equipment for this purpose are not run of the mill. This equipment operates at much higher temperatures and pressures and consequently are built of metallurgies, which require welding competencies that only a few top notch fabricators possess. GPE is proud to be counted among these select few. 

 

GPE is reportedly targeting to achieve $ 250 million in the next three years. How do you plan to achieve it? 

Our existing product portfolio, our global client base, the large expansion in capacity with the addition of our Dahej plant, constant modernisation of our manufacturing facilities and our relentless quest to develop and enhance our competencies offers us great opportunity to rapidly accelerate our revenue growth in the oil & gas Space.

 

The acquisition of the almost 100 year old Yuba and Ecolaire brands and technologies through our 100-per cent subsidiary Godrej Americas Inc has augmented our engineering capability. That, with our manufacturing strengths, has uniquely positioned us, as a leading global end to end solution provider when it comes to serving the feedwater heater and surface condenser needs of our power sector customers. For us, this is just the first step towards adding new technologies to our portfolio. While we shall be judicious in the choices that we shall make going forward, in line with our ambitious growth plans, we plan not to let go of any significant opportunity to enhance our product offering.  

 

What are the challenges faced by manufacturers of process equipment in India? 

Every industry has its own set of challenges and the process equipment industry is not immune to this. This is an industry that is heavily dependent of special skills - not only in the shop also in the office. Areas like project management and estimation are just two of them. India does not produce the pressure vessel grades of steel that the industry requires. Most of the critical materials have to be imported putting time pressures on Indian manufacturers that are not faced by their foreign competitors.

 

The introduction of GST has helped levelling the field to a good extent. It has also enhanced competitiveness. A growing economy should strengthen the hands of the Government to reduce rates in the future. This will be a big boost for the economy. Infrastructure is improving but it will be a while before we reach the standards of countries like South Korea, where many of our competitors operate from. Chinese competition is rearing its head. 

 

Companies are investing in skill development. This is essential if the industry is to realise its full potential. The Make in India initiative is indeed one for which the Indian Government deserves compliments. Policies have to be enunciated to support this initiative. Around the world ‘local content’ requirements are being mandated. From a domestic standpoint, this is good. From an export standpoint, not so. While the ‘India’ brand has become much stronger, Indian companies will have to continue to work to reinforce the positive values of this brand. Only continuous good performance will help.

 

What is the outlook for process equipment in India? 

As India’s economy continues to grow, demand for basic goods will continue to rise. Chemicals, petrochemicals, fertilisers, power, petroleum products will all see accelerated demand and so accelerated investment. These are all areas that need a strong process equipment manufacturing industry. Growth implies that companies will have more money to invest in expansion and modernisation of their own infrastructure. With growth, tax revenues will make more money available to the government to invest in infrastructure and also bring down tax rates. There are several macro-economic benefits that result from growth. We are already seeing an increasing share of domestic demand in our business. I have no reason not to be bullish about the India story.

 

What are your growth plans for Godrej Process Equipment? 

We see India and the Asia-Pacific region growing in general. We expect growing Indian economy to generate increased demand. Simultaneously, the economies in the Far-East like Vietnam, Thailand, Indonesia are seeing large scale new investments in upgradation and modernisation of refineries and power sector. The Middle-East has always been, and will continue to be, one of our primary markets. Several new investments in the US are also very attractive. The identified pockets of opportunities offer bright avenues to do business.