@shanki_Bansal: Thanks for sharing your note. Few questions since you follow it for quite some time:
- Any idea why they are unable to scale up [Sales and Op. Profits] their subsidiaries meaningfully even though some were started 9+ Yrs. back?
- What’s the revenue potential from downhole pumps, mud motors, and Solar Pumps?
- What’s their USP in the exports market since the majority of revenue comes from exports? In FY15 AR, it was noted “Two global major players have set up their base in India. Their presence is felt significantly as some definite amount of business has been lost in the year under review”. I infer that the company had difficulty competing with global major players in home base. How did they overcome the trend in exports?
- How are their products or competencies different from peers such as KSB, WPIL etc?
Disc: Under due diligence.
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@Surender Thanks for your inputs. I believe that the below points may justify your queries.
- Positive displacement pumps market is relatively small: The domestic and global market of centrifugal pumps is very large i.e. Domestic Rs 17k cr and Global market is Rs 2.6lac crore. However the positive displacement pumps market is significant lower i.e. Domestic Rs 1.3k cr and Global market is Rs 25k crore.
- RPL has been manufacturing helical rotor pumps caters to mining company (Coal India). The availability of spare parts was challenging and hence in 1978, it entered into a five-year technical collaboration with Stothert & Pitt to manufacture twin screw pumps and spare parts in India. In Feb.95, RPL signed a technical-cum-buy-back agreement with Kosaka Labs (part of Mitsubishi, Japan) to acquire technology for triple-screw pumps, and to sell double- and triple-screw pumps to Kosaka under the Kosaka Roto brand name. In 1996-97,its earnings from exports amounted to Rs 4.84 cr. The company always focused on positive displacement pumps where the market is small.
- Till 2015, the company manufactures progressive cavity and twin crew pumps. In 2023, the company has started diaphragm, gear pumps downhole and mud motor pumps. Also, by the end of this financial year the company will start manufacturing solar pumps. It seems the company is now aggressively increasing their portfolio.
- The demand for positive displacement pumps is now increasing at faster pace due to the below reasons:
* Increasing popularity and usage of displacement pumps: The growth of the reciprocating pumps market is majorly driven by their extensive usage in high-pressure, low-flow applications, such as oil & gas, as they generate greater amounts of pressure per operation.
* Increasing Usage of displacement pumps in food and beverages: Since food processing industries deal with highly viscous fluids and fluids with large particles, the need for positive displacement pumps stands critical to ensure pulse-free, smooth, and hygienic performance.
* Capacity Expansion and industrialization: Since the industrialization in India is now growing at a faster pace, the demand for positive displacement pumps will increase.
* Waste Water treatment: Since wastewater is often contaminated and poses a high risk of system failure and clogging, hence positive displacement pumps is highly effective and efficient.
What’s the revenue potential from downhole pumps, mud motors, and Solar Pumps?
- Global market size of downhole pumps, mud motors is Rs 7000cr as on 2022 and expected to grow at 3.6% CAGR.
- Global market size of solar pumps is Rs 20,000cr as on 2022 and expected to grow at 6.9% CAGR.
- Since RPL is 200 cr topline companies at present, the runway is still pretty decent to grow.
In 2015, due to entry of global players they have taken a cost cut and hence the margins declined by 500 basis points. However if you see the below table the margins are much superior than peers.
ROTO/ KSB/ WPIL:
- KSB and WPIL are involved in manufacturing of centrifugal pumps.
- Since ROTO is into positive displacement pumps which is bit complex in nature and more customized in nature the spare parts sales is also much higher and hence the cyclicality is relatively lower.
- Below is the summary of operating margins of the companies in last 9 years:
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What is the amount of capex being announced for solar pump by the company and by which time it will be operational?
Recently on 4th Feb 2024, Roto Pumps introduced “Roto Rudra” - solar pumping systems. These products will be manufactured by their subsidiary Roto Energy Systems Ltd.
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Is there any amount being said?? Like 100 crores or so??
And won’t it face any competition from Shakti pump which is already an established player in solar pump segment
Recently meet bussiness person who is dealing in pump category majority in farmers side , roto pump is best quality in this segment very few players exclusive in ss category , another ss pump producers category magnet is easily stick but in roto pump not happened ,not naming other pumps because he is listed, roto pumps durability is much longer than other almost 5 years but if problem start maintenance cost very heavy just because we have to use his part only, but in farmers category majority uses casting body. If this scuttlebutt not useful admin pls delete this post,
Disc tracking position
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The company has incurred a cumulative phase wise capex of Rs. 75cr for downhole, mud motors and solar pumps. Some scuttlebutt indicates that ROTO has best quality pumps and hence command some brand value.
At the annual meeting, management also stated that, in contrast to positive displacement pumps, which have operating margins of 20% plus, solar pumps will be a low-margin product with operating margins of 14–16%.
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Please refer the official announcement in reference to solar pumps
70f7062a-38af-4cc4-bed1-ebe6a17084f4.pdf (333.8 KB)
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is capex finished?..when will be expect commercialization? What is the revenue potencial in coming years?
What will be the revenue if operated on 100% capacity??
- FY21 AR: Solar pumping systems would involve a capital outlay of Rs.11 Crore.
- FY23 AR: Solar pumping system would provide tremendous business opportunities due to Government’s focus on usage of alternate energy sources to mitigate climate changes coupled with the escalating Energy prices due geopolitical issues would lead to increased focus on renewal energy thereby increasing opportunities for Company’s solar pumping project.
- Exchange Fling: https://www.bseindia.com/xml-data/corpfiling/AttachHis/70f7062a-38af-4cc4-bed1-ebe6a17084f4.pdf | Name of the Product: Submersible Helical Rotor Pump Set, Submersible Centrifugal Pump Set, Solar Controller with Remote Monitoring, Surface Helical Rotor Pumps
Inference from all the above data is that it’s another me-too product in a non-core area and might not contribute much in the near term.
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@Surender
Agreed…
Submersible Helical Rotor Pump Set and Surface Helical Rotor Pumps are positive displacement products only. However, Submersible Centrifugal Pump Set is a traditional centrifugal pump which is a new segment for ROTO.
Solar Controller with Remote Monitoring is a heart of solar pumping systems to optimize power and match power demands at different intervals.
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