— Bill Hammond, CEO,
Hammond Power Solutions
US-based
Hammond Power Solutions Inc. is a recent entrant in the
Indian transformer market, having acquired 70 per cent equity stake
in
Pan-Electro Technic Enterprises Pvt Ltd (PETE Transformers) in
February this year. In this exclusive interaction,
Bill Hammond
takes us through this acquisition and explains why he believes that
the Indian transformer market is a big business opportunity.
Hammond is upbeat on India but feels that weak areas like
inadequacies in the electricity grid and transportation infrastructure
need to be looked into seriously. An interview by
Venugopal Pillai.
At the outset, tell us about the rationale of acquiring equity
stake in PETE Transformers in your pursuit of entering the
Indian transformer market?
It is our goal to become more of a global company over the next
five years. We want to do this in order to participate in the
tremendous growth opportunities in developing countries like
India as well as to diversify our dependence on the North
American economy. PETE Transformers is the perfect fit for
HPS because of the engaged family management, the caring
attitude towards their employees, as well as the importance of
product quality and reliability. They are also focused on the industrial and commercial markets in India, which are two
markets that HPS understands and has a long history of serving
in North America.
What is the key technology that Hammond plans to bring to the
Indian market?
Our first objective is to grow the organic oil transformer
business that PETE is already very capable in, by expanding
their market penetration across India and other parts of Asia,
Africa, and Australia. We also want to expand their product
range in cast transformers by transferring technology and
designs from our European company, which will enable PETE to
serve new and existing markets even better by offering both oil
and cast transformers. Finally, HPS is one of the largest
manufacturers of vacuum pressure impregnated (VPI) dry
transformers in the world and we believe that there will be a
growing demand for VPI type transformers from original
equipment manufacturers (OEMs) in India going forward.
What is your business outlook on the Indian transformer
market and what do you rate as the key challenges?
India is experiencing a slowdown in growth like everywhere
else in the world at the current time. It is our belief that market
conditions will improve in 2013 because of the tremendous
need to expand the industrial and commercial infrastructure in
India. The biggest challenge we see is the critical need to
improve the energy grid as well as the transportation
infrastructure. Both need to be expanded and upgraded greatly
in order to meet the present and future needs of India.
Apart from India, has Hammond made, or is interested in
making, similar acquisitions in other emerging markets?
Over the last 18 months, HPS has not only acquired 70 per cent
ownership in PETE but also bought a transformer company in
Italy. Our short term goal is to integrate and maximize the
growth of these two companies before looking for any further
acquisitions. At the same time, we expect to grow sales in
Canada, the United States and Mexico by at least 10 per cent a
year, so we have a lot of activities underway. It is our intention
in several years however to look into doing either an
acquisition or joint venture in South America in order to
participate in the growing markets on that continent.
China has already entered the Indian power transformer market.
Generally speaking, how do you rate competition from China?
The transformer industry in China has exploded over the last
ten years given the huge growth in their country's economy,
and Chinese competition certainly should not be
underestimated. It is our belief however that domestic
relationships, faster service from local suppliers, and superior
quality will limit Chinese competition in the geographical and
product markets that HPS is looking at serving.
Please discuss your medium-term strategy for PETE
Transformers. For instance, India's EHV transformer market is
looking up. Do you have plans to scale up PETE's product range
beyond 132kV?
Our plans are to strengthen the current range of oil-filled
transformers that PETE offers. We will continue to monitor the
market situation with regard to higher voltages in the oil-filled
business up to 220kV, but in the short term do not plan to
expand up to that range. We also intend to make some process
improvements that will enhance the quality of the oil
transformers we manufacture to meet or exceed the needs of
our customers, both domestically and export and as
mentioned, we plan on expanding the types and range of both
cast and VPI transformers based on our European and North
American capabilities.
In the next five years or so how important will India in the
overall business portfolio of Hammond Power Solutions?
We are very bullish about the importance of our Indian
company to HPS over the next five years. We believe that in the
markets we intend to serve from our Indian factories—India,
the Middle East, Africa, Southeast Asia, and Australia-there is
the potential to do $100 million CDN in sales of oil, cast, and VPI
transformers by the end of 2017, and we feel very fortunate to
have found a company like PETE that will form an excellent
foundation for our growth plans going forward.