Centum Electronics to Add Capacity as Orders From Alcatel, Ericsson Revive

Centum Electronics Ltd., an Indian maker of electronic components for companies including Alcatel- Lucent SA and Ericsson AB, said it plans to build its second factory as overseas demand revives

The company, 10 percent owned by Singapore’s Flextronics International Ltd., plans to invest 250 million rupees ($5.3 million) in the year ending March 31 to increase capacity, said Managing Director Apparao Mallavarapu. The plant will be built in India’s Karnataka state, he said.

The International Monetary Fund yesterday raised its forecast for global growth this year as Canada and the U.S. lead advanced economies out of the worst recession since World War II. The world economy will expand 4.6 percent in 2010, the biggest gain since 2007, the Washington-based fund said, helping boost demand for electronics and services from India.

“Export markets are looking good and 60 percent of our revenue came from the U.S. and Europe last year,” Mallavarapu said. “We see strong growth in the electronic manufacturing sector and products and in all the business segments.”

Centum, which has risen 55 percent this year, fell 2.9 percent to 118 rupees at 1:55 p.m. in Mumbai.

The company based in Bangalore plans to set up an office in either the U.K or Germany this year, Mallavarapu said. It will also hire 500 engineers and technicians this year, he said.

“Customers in the industrial and telecommunications space are seeing the end of the crisis as economic conditions are getting better,” Mallavarapu said.

To attract larger customers the company plans to combine with its subsidiary by early August, K.S. Desikan, chief financial officer of Centum Electronics said. The new company will be 57 percent owned by Mallavarapu, 5 percent by Flextronics, while the public will own the balance, Desikan said.

“The merged entities will be more attractive to international customers who look at overall balance sheet size for prequalifying vendors,” Mallavarapu said. Centum Electronics can then obtain bigger contracts and greater negotiating power in the market, he said.

To contact the reporter on this story: Jay Shankar in Bangalore at jshankar1@bloomberg.net

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