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Water management firm Wabag to cuts costs by shifting control from Austria to India

The Hindu BusinessLine:  June, 2014

Chennai: VA Tech Wabag, a water and wastewater management company, will increasingly operate its overseas businesses out of India to take advantage of lower costs and higher margins, according to Rajiv Mittal, Managing Director of the Chennai-based multinational.

Earlier, its international businesses were run out of Austria, the base of its erstwhile parent company, which it acquired in 2007.

But now, new subsidiaries fully handled out of India have emerged as better paying verticals, says Mittal. In 2013-14, the overseas businesses contributed over 60 per cent of the company’s revenue of about ₹2,230 crore.

The business in Egypt, Tanzania, the Philippines, Nepal and Oman are directly under Indian team support, on the basis of financials, technology and manpower. Even the large markets in Latin America are supported from India.

“We believe the margins from this vertical are closer to those in India, by about 10-12 per cent, rather than that those of international markets with margins of around four-five per cent,” he said.

The company takes advantage of the global reach of the 90-year-old Wabag brand with lower costs and comparable expertise available in India. This gives it an edge over international competition, he said.

The company has strengthened its operations in South-East Asia, West Asia – with focus on Qatar, Oman and Saudi Arabia – and entered Africa last year, he said.

Also, common functions like human resource management, finance, treasury, MIS (Management Information System) reporting are being brought to India for better control and done at one-fifth the cost the company will have to pay in Europe. “This is helping us rationalise costs. We are not reducing but shifting people,” Mittal said.

Markets handled out of Austria cover Central and Eastern Europe, including Turkey, and North Africa, part of West Asia. It is also slowly moving into some CIS countries.

Over the last three years, VA Tech Wabag achieved its annual guidance targets for revenue and order intake. For 2014-15, its revenue guidance is pegged between ₹2,600 crore and ₹2,700 crore and an order intake of ₹3,200 crore-3,400 crore. As of now, its order book stands at ₹5,354 crore.