Chinese firm Dongfang is in talks to take over Trichy-based power equipment manufacturer Cethar. The acquisition will help the Chinese company have presence in India. It will also help Dongfang control its costs as well as comply with the localisation norms in India.
Cethar, formerly known as Cethar Vessels, manufactures both sub-critical and super-critical boilers, used in power plants. It also designs and constructs thermal power plants up to a capacity of 800 megawatts. In 2010-11, it clocked sales worth Rs 2,430 crore. "The valuation of this company comes to around Rs 500-600 crore. They are currently in talks and the acquisition would help Dongfang have an entry into Indian manufacturing," said a person directly involved with the deal. Neither Cethar nor Dongfang responded to an email questionnaire.
Cethar was founded by K Subburaj, who started it in Trichy as a sub-contractor to Bharat Heavy Electicals (BHEL). Subburaj had worked for the Indian Space Research Organisation (ISRO) prior to starting the venture. The company expanded into power manufacturing and then into a construction company for power plants.
Analysts say Indian facilities can help foreign companies as they have been asked to set up service centres in India to help power plants under construction using the equipment. "This move will help because power companies will definitely prefer firms that have domestic presence," said Piyush Nimgaonkar, manager at CARE Research.
Dongfang, along with Shanghai Electric and Harbin, has already garnered a major market share amongst private power generators. About 24,437 megawatts power capacity is installed in India; plus, 40,000 megawatts of power capacity, based on Chinese equipment, is under construction. This has created a huge furore amongst Indian manufactures such as state-owned Bharat Heavy Electricals (BHEL) and private engineering company Larsen & Toubro.
After multiple representation by industry bodies as well companies, the government has made it mandatory for Chinese companies to have service centres in India. In transmission and distribution sector, state-owned companies are preferring companies having domestic manufacturing facilities. A bulk tender for the country's largest power generator, NTPC, had barred foreign companies which did not have an Indian joint venture partner.