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Voltamp Transformers


Voltamp Transformers is in the business of manufacturing transformers for the power sector.

The company appears to possess a competitive advantage in providing good after-sales service on its products.  

Management have also maintained a conservative capital structure with excess funds invested in mutual funds.  It uses this relatively strong capital position to extract favourable terms from its suppliers.

The company reported fluctuating operating profits on reasonably stable revenues – reporting about 60 to 70cr of operating profits on about 500cr of revenues.  It operated with a large net cash position.

The business is primarily exposed to rising copper, steel and transformer oil costs.  It faces stiff competition in its business along with compressing operating margins, which isn’t improved by overcapacity in the industry.  It also faces risks of a drying order book during lean times.  It is subject to government policies (or inaction) on land acquisition, coal block allocations etc. 

A concerning trend in this business is the practice of project-focused MNCs manufacturing transformers on their own (captive production).  Furthermore, customers are now buying transformers on a turnkey basis through EPC contractors, which reduces operating margins. Moreover, a period of credit contraction (as now) results in longer working capital cycles that delay the receipt of operating cash flows.

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