Key highlights

Kirloskar Pneumatic (KPC) is engaged in manufacturing high technology air-conditioning refrigerators (ACR) and Air compression and transmission products.

In ACR, the company manufactures high-tech air-conditioning of marine equipment for ship, warship, commercial boards, coast guard etc, which involves very high technology. Kirloskar Pneumatic does almost 90% of India's Navy's air-conditioning for all the ships, new ships or the retrofit part. The company's focus in the ACR segment is unique in technology and it is qualified to bid for hydrocarbon-based refrigeration systems for refineries, petrochemicals, gas fields, gas processing.

In air compression business, the company manufactures reciprocating compressors, screw compressors and large centrifugal machines. In Gas compression business, KPC is present into upstream and downstream division. The company is also into distribution segment of Oil & Gas and manufactures CNG compressors. In the CNG business, KPC are market leaders with the market share of close to 45% - 50% in gas compression

In transmission business the company makes traction gears for the railways, LMA gearboxes for windmills and lot of different varieties of axis wires and gearboxes for the railways. The company has now ventured into making large gearboxes for the marine industry.

The company has two plants one in Pune and other in Saswad, about 20 km from Pune.

Nearly 60% of business comes from system engineering and 40% of business is in standard products like the compressors made to suit certain standard products, standard traction gas for the railways, standard axle drives and gearboxes for the railway industry, standard ammonia compressors, which is then bought by OEMs to build cold stores, some little pharmaceutical processing plants, food processing, fish processing etc.

The company is also into coal gasification compressor segment and it received the first ever order in India of about Rs 100 crore in FY'11.

Since the company always carried healthy order book, the recession if any happens, always takes time before it reaches to KPC's financials. Since the company was having order book during slowdown period of FY'09, sales growth for FY'09 was not a problem, but decision on future projects got delayed and affected growth in subsequent years.

The company is full with orders for FY'12 and so far has not seen any delays in execution or increase in interest rates affecting the business. Most of the orders are fixed price contracts but the company has very strong risk assessment team which looks after each order and each tender and company take into account how the prices of steel and special materials will vary over the next nine to ten months.

KPC has signed MOU with Indian Railways for production of RoadRailer. The company will set up the manufacturing base on its land parcel in Nasik. The company has also increased its borrowing limit to the tune of Rs 1000 crore. So far, KPC has permission to operate between Delhi and Chennai and as it start manufacturing more and more then it will be taking on other routes.

The company continues to be optimistic about the transmission segment although the segment reported loss of about Rs 8 crore in FY'11. Nearly 70% of the past 2 years capacity addition has been made in this segment, as it is very capacity intensive. The company has ramped up the business and many product lines within the segment have been dropped. The company will stabilize the segment in FY'12 and the growth will happen from next year onwards.

From 5 years prospective the management continues to remain very bullish on transmission segment.

For FY'12, the capex is equally divided between compression and transmission and is around Rs 40 crore each.