C.E. Fernandes, GEI Industrial Systems Ltd
Release Date: 2011-06-28
GEI Industrial Systems (GEI) is the market leader in India for Heat Transfer Technology, serving mainly the Power and O&G industries. The company enjoys a market share of 45% in Air Cooled Heat Exchangers in the Oil & Gas Sector and about 70% in Air Cooled Vacuum Steam Condensers, in the Power sector. What has allowed this positioning?GEI is a very active player in India and has been steadily growing over the last four decades. The technology that we have is fully Indian as a result of continuous and heavy investments in research and development (R&D) and innovation. The growth, based on this, has allowed us to become number one in India and number three in the world for cooling systems.
GEI has been growing despite the international competition and our customers are very well known players in the field. We have the advantage of being an Indian company with our own technology. So most of the Indian players like L&T or IOCL, who are extremely happy with our product, are willing to give a push to Indian companies, like us. Over a period of time, we have been successful in maintaining quality and reliability of the product, which has given a lot of confidence to Indian customers.
In India, GEI is the only approved party by ONGC to offer the complete cooling range for offshore applications. Clients are aware of the company’s quality, applications, as well as manufacturing capabilities.
This has been the main factor enabling us to grow in a sustainable way.
GEI Industrial Systems is listed on the Bombay Stock Exchange and National Stock Exchange. Cost of capital is an issue today in India, where interest rates are at the lowest in worldwide markets, but swing between 12% and 14% in India. What is your assessment over the difficulty to raise funds for the Indian industry and why was it a good strategy to finance your growth on financial markets?
To finance GEI’s growth in India, we have a fairly easy access to Indian capital. As long as I remember, the cost Indian capital has been about 15% in the earliest stages, and after the government liberalized the market, it came down to around 11%. Because of the inflation, it has again gone up to 12 to 13%.
With forty years of experience and an excellent track record, GEI has gone from a small scale industry to a key player, thanks to sound finances. GEI is a profit making company that rewards investors adequately. Debt is kept at a minimum, and when the company raises capital, whether it is through debt or equity, it is done in a given time frame, so that we always raise funds before we go for a project.
Last year GEI had a turnover of 4,16 billion rupees (approximately 90 million USD) thanks to a 54% growth. How are you planning to sustain this growth?
Presently, GEI’s role within the O&G and Power industries is to provide equipment packages: the cooling systems. GEI wants to move up in the value chain to total packaging, in which the air cooling system would only be a part of the whole – around 50%. Thus, 50% of our product portfolio would be other items, which we will be sourcing from other manufacturers – e.g. compressors from Dresser Rand-, and then offer a total package to O&G companies.
Going for packaging will bring more revenue to the company. For instance, a 50 million contract for a cooling system would become a 100 million contract.
Today, most of your clients in O&G are downstream, considering you have had orders from crude oil refineries, petrochemical plants and LNG and CNG processing stations. India is definitely becoming a refining hub with plans to double its capacity by 2012. To what extent can GEI benefit from this?
There are a lot of new projects, such as the offshore gas going through pipelines to Jamnagar, and the HBJ pipeline going from Hazira on the Gujarat coast right up to Delhi and beyond. All this requires a lot of investment in the piping and booster compressor stations, which need large cooling systems and therefore generate a lot of revenues for GEI.
The government also needs gas based power stations, which offers a lot of opportunities for us.
To what extent does the competition come from international markets as opposed to Indian companies in your overall business?
As far as O&G is concerned, GEI does not face much competition from Indian companies. Competition comes mainly from Italy and Korea.
With equipments installed on the five continents, we can say today that GEI Industrial Systems is an Indian company that has brought Indian expertise and equipments on international markets. What is the level of awareness of the worldwide industry about the quality of Indian equipments and technology?
There was a time when Indian quality was neither appreciated nor accepted in most countries. However, in the last decade or so a lot has changed. There has been a shift in perception in recent years, and many are now confident of the quality and technology of Indian products, which are at par with European vendors.
As an ambassador of the Indian expertise and technology, what can you do to increase Indian branding and what is lacking in your opinion for Indian output to be internationally recognized, and not only as a human resources powerhouse?
Almost every week, somebody visits us from abroad to establish a JV or some kind of manufacturing arrangement with GEI. Foreign visitors have a good opinion of Indian capabilities; we expect a good turnover to come from these resources.
Are you looking today at growing organically or are you looking also at JV opportunities with international players or acquisitions of businesses in your areas of expertise?
As of now, GEI is making substantial investments for expansion. Therefore our immediate concern is on completing the expansion and getting the facilities ready. It is urgent for us to be in the position to meet the explosive demand arising in our own country.
Given the numerous opportunities in Middle East, Far East, and African countries, GEI is also constantly looking for partners to explore operations there rather than manufacturing here and sending the production over.
Considering you are looking both at the domestic and international markets, how challenging is it to allocate the right resources?
We are an international player. The message is very clear among all our executives that we are going to be a global brand. We have local agents in Oman, in Brazil, in Singapore, which are key centres for the O&G business. We operate in these markets through JV with key local players.
However, to balance both focuses, the timing is very important. We have an association in Oman, where we were supposed to invest 20 million USD. Because of the circumstances in oil markets, we did not proceed with the project, and today the demand is starting to go up again.
What are your personal ambitions for GEI Industrial Systems? What is left to achieve for you?
I want the GEI brand to be internationally well known, and we are aggressively working to achieve that.
We want to develop facilities in different locations on the globe, to be in a better position to supply different markets. The next market to enter will probably be South Africa, where we are in the process of sending someone to explore the potential. My ambitions should be fulfilled in around three to five years.
Are you optimistic about India’s future development?
We see a lot of activity taking place in India, especially in infrastructure, power and O&G. These last couple of years, we have been seeing the highest growth of the last 80 years. In order to maintain and sustain India’s Gross Domestic Product (GDP) growth rate of about 8% to 9%, the country needs investment in infrastructure and in the O&G and power sectors.
I strongly feel the time for India has come to grow globally.
Do you have a final message to the Oil &Gas Financial Journal readers?
The O&G community should look global and accept companies which are coming up aggressively to meet the demand in these areas, especially large multinationals such as Chevron, Shell, Exxon, Mobil. They should open up in such a way that companies from the developing countries like GEI can get a good participation to join in their progress.
Today we are part of our own country’s development, thanks to the recurrent collaborations with ONGC, BPCL, IOCL, and so forth, however we would also like to be part of growth worldwide.
| Company: | GEI Industrial Systems Ltd |
| Position: | Founder, Chairman & Managing Director |
| Country: | India |