Powerful Play
Omani companies are aggressively expanding their operations not just in the Sultanate but in other markets also. Voltamp Manufacturing Co. LLC, the 15-year old flagship company of the Al Anwar Group, is also broad-basing its facilities in Oman and taking the cross-border route to establish operations overseas. With modern plants at Rusayl, the company along with its sister concern, Voltamp Transformer Oman Co. LLC, manufactures a wide range of power and distribution transformers as well as low voltage distribution and control systems and also provides engineering services and solutions. Akshay Bhatnagar speaks to Mohammad Jaffar Bin Mohamad Sulaiman, CEO, Voltamp, on the company’s impending RO10 million IPO in the first quarter of 2008 and its planned expansion within Oman and abroad.

What’s your vision for the company?
We would like to be in a leadership position in the MENA region’s power sector, operating in the distribution and control systems, and power transformers segment.

How big is Voltamp currently?
If you look at the global demand of the sector we are in, I will say we are very small. But our vision is very clear. We have drawn a five-year business plan, where we have set ourselves targets for diversification of our product range, covering more territories in the MENA region and adding to our technology strengths.

Besides Oman, which other markets are you currently catering to?
Primarily the GCC market, including Qatar, Kuwait, UAE, Yemen and Bahrain. We are yet to enter Saudi Arabia but we are optimistic that we will be able to penetrate the market thanks to the Kingdom’s liberalisation policy that is leading to more business opportunities for players like us. The demand in the region has increased but the current installed capacity is not adequate enough.

We are serving the utility sector but our primary focus and strength is in the oil and gas facilities. Many prestigious names in the energy sector are our regular clients.

But in order to become the leading player, don’t you think you need to focus on fast growing sectors such as tourism instead of just oil and gas?
It is true. We are catering to the demand from the tourism sector also as part of our utilities portfolio. The contractors who execute the projects and maintain the properties are our major clients. If you look at the recent refurbishment of Al Bustan Palace, we got a significant order from L&T who were the main contractors for the project. Despite a very tight deadline, we supplied customised transformers to them. We have provided our products to Shangri La Barr al Jissah at different times. We are currently providing the required product range to The Wave, Muscat also. We are hopeful that we will get significant orders from The Blue City as well. On the industries side, Petroleum Development Oman, Occidental of Oman and Sohar Aluminium are some of our large clients.

How do you plan to expand your capacity?
In fact, we are looking at expansion of our existing facilities, setting up new ones and even considering the acquisition route. In Qatar, we have successfully established a manufacturing satellite with a local partner. And we foresee that this model will be repeated in other places within the MENA region. So we are exploring the possibilities within GCC itself and thereafter in Africa. As far as acquisition is concerned, we are on the lookout in the Indian sub-continent.

Tell us more about your Qatar project.
We have a 51 per cent stake in the company. The rest is with prominent Qatari companies, Salam International and Alkaran Al Arba. The combined investment in the project is RO1.7 million. The project consists of basically manufacturing transformers up to 10 MVA. Another bay will be for manufacturing switchgears. We have entered into a partnership with the French giant Schneider for this. Trial production will start in June 2008. The facility will meet the requirements of Qatar and Bahrain.

We are also going for a new production base in Oman to produce an upgraded range of transformers. Oman offers the advantage of being a popular destination for investment and is very close to India, which is one of our major suppliers of raw materials.

When is it going to be operational?
It will take us around 18-22 months for setting up the factory. The main challenge for us is to get certain kinds of production equipment that takes 18 months for delivery from the order date. We are looking at how fast we can get them. The project will cater to local as well as demand within the MENA region.

Will this be a separate company altogether or it will be part of the existing companies?
It will be a separate company.

Have you named the company?
Not yet. We are looking at an appropriate name, with Voltamp being a part of it. The name will also depend on the nature of the tie-up with our partner. It could be a pure technological partnership or a joint venture.

What is the total investment envisaged for the project?
In the range of RO 10 million, excluding land cost. We have applied for a plot in Sohar Industrial state. It will have a total area of 80,000 sq mts.

Are you also taking an IPO route shortly to raise funds?
We are going public as part of our strategy to become an SAOG company. We are not going public to raise funds for this project alone.

Which company will go public as you have two existing companies and the third one is on the way?
We have few options in front of us. We can go public with our existing lot or create a new company for going public or merge all businesses under one entity and take it public. It has not been finalised. We are in the process of identifying the best possible option.

Why do you want to go public?
By going public, we will facilitate the participation of the public at large in our company. It will also help us to expand our activities.

Do you think family owned businesses are under pressure to go public?
No. We are not under any such pressure. It is purely a voluntary call from our side. Any business that intends to expand has three options–one is injection of additional capital by the owners; second is investment via private placement and; third is to raise money from the public. Each method has its own advantages and disadvantages. Our board has decided to go for the third option.

How much shareholding will be diluted?
The existing laws stipulate that at least 40 per cent should be offloaded. We plan to initially go for 40 per cent dilution.

Do you think this 40-per cent criteria is a fair treatment for business families? Given a choice, will you go for selling less than 40-per cent as was done in the case of Omantel?
Omantel is a government owned company. All private firms will have to go public according to the law. I think a sizeable share for public involvement is always better. Despite selling 40-per cent, we will have a reasonable stake in the company. Ours is a profit making company and let the public also take a share of the profit.

How do you look at the upcoming bilateral and regional FTAs in terms of opportunities and threats?
I think there are more opportunities than threats. Opportunities are there to sell my products to these countries, provided I am competitive.

Are you competitive enough?
I think we are. If you look at the prices prevailing in the market and compare them with my offerings in a similar category of products, I have the advantage. Compared to many other markets, including the neighbouring ones, Oman is a less expensive place to live in and to operate your industries. A smart businessman will adopt other cost saving measures too to keep the production cost at a low level to be more price competitive.

But what about the scale of business? Exports from markets like China are highly price competitive due to their large-scale facilities.

I agree but production alone is not the only factor in price competitiveness. Location also plays a crucial role in product categories like ours. Take, for example, the freight cost. The transportation of big transformers is very costly. If we are catering to neighbouring markets, our freight cost component will be much lower than that for a competitor from a far off place like China.

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