Ranjit Shinde
The Economic Times
Rolta’s acquisition of US-based Piocon Technologies couldn’t have come at a better time than this. The acquisition would strengthen Rolta’s engineering design business at a time when new capital expenditure is hard to come from refineries given slowing demand for petroleum products and global credit crunch. At the same time, at over $10 million, the deal is too tiny to significantly pull down Rolta’s financial performance for the next few quarters until it fully integrates Piocon’s operations with itself.
As a part of its engineering design operations, Rolta caters to petroleum refining and power sector. Of this, the refining segment contributes over 18 percent to annual revenue of over $260 million (Rs 1,250 crore in last 12 months). Since Rolta provides refinery design support under this segment, the business largely depends upon new capex plans of refineries in India and abroad. With slowing economic scenario, this part of Rolta’s business is likely to take a hit, as refinery capex would drop.
The deal is of strategic nature for Rolta. Acquisition of Piocon would provide support to this division once Rolta starts fully leveraging the newly acquired operations. This is because Piocon offers services related to data integration across various IT platforms of a refinery, a business service, which is of support and maintenance in nature. Such services become all the more essential to refineries in the times of slowdown as they help reduce cost of ownership in medium-to-long term. Typically, a medium sized refinery (with refining capacity of about six million tones per annum) would have to invest anywhere between $5-10 million for such a solution based on size and complexity of the refinery. The Rolta management claims that annual savings as a result of implementation of such a solution may go up to $20 million
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