Brief about the company: Roto Pumps was founded in 1968 and is a manufacturer of industrial pumps. Typically, a pump transforms electrical energy into hydraulic energy to move fluids (liquids or gases) or occasionally slurries by mechanical action.
Types of Pumps: Broadly there are 2 types of pumps i.e. pumps which are 100% based on centrifugal technology and other one is majorly based on positive displacement pumps.
Centrifugal Technology pumps (Traditional Pumps): Centrifugal pump is a very old technology used to move simple fluids (i.e. Water or thin liquids) by means of the transfer of rotational energy from one or more driven rotors, called impellers. The impeller of a centrifugal pump must rotate continuously and quickly in order for it to function effectively.
Limitations: Centrifugal pumps lose efficiency when dealing with more complicated fluids (i.e. thick fluids such as Oil, Chemicals, Paints Pharma etc.) because of increased resistance and the requirement for higher pressure to maintain a certain flow rate.
Positive displacement pumps: High viscosity oils or slurries like mud can contribute to overheating and excessive wear, which can result in damage and early failures. Positive displacement pumps are less likely to experience these issues and frequently run at much slower speeds. Moreover, a centrifugal pump needs to be primed with the pumped fluid at first since, in contrast to positive displacement pumps, it cannot create suction while it is dry. As a result, applications with intermittent supplies are not suitable for centrifugal pumps.
Advantage of positive displacement: More efficient in handling complex fluids with high viscosity. More efficient with increased pressure and does not require any priming (i.e. removing air from the suction line).
The centrifugal pumps market and highly competitive due to simple technology vs positive displacement pumps. The spare parts are critical in positive displacement pumps and have high margins.
Roto Pumps is the only listed player in India for handling complex fluids. The company manufactures Progressive Cavity pumps, twin crew pumps etc. They are now venturing into diaphragm and gear pumps and also focusing on solar pumps. Roto Pumps has wholly owned subsidiaries in America, Germany, Singapore, UAE and step-down subsidiaries in North America, Malaysia and Africa.
The company has an excellent track record of effective capital allocation with negligible debt and no unrelated diversifications. Over the past five years, the company has had gross margins of over 50% and operating margins of over 20%.
Revenue Break up: The company used to generate 2/3rd sales from export since complex fluid pumps market is still small in India. Almost 50% revenue is generated for the sales of spare parts. Since complex pumps required higher research and development hence the employee cost is almost 25% as per AFS of 2022-23.
Capex:
- The company has announced capex and new factory for manufacturing solar pumps in greater Noida under the name of Roto Energy Systems Limited is under construction and will be operation by the end of current fiscal.
- The company has already developed downhole pumps and mud motors pumps recently.
- Further the Company has initiated the installation of an additional solar power system of 550 KWp at Greater Noida Unit (Cost Rs 2.13cr). With this installation, the company is able to meet around 20% of its electricity requirement from solar power.
Disclaimer: Above study is for educational purpose only and not a buy sell recommendation by any means. Invested from lower levels and added more recently.
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