Delta baulks at building India plant

Delta Electronics (Thailand) Plc will likely delay construction of a new plant in India due to the sluggish market, as the company expects Indian revenue to be flat at US$100 million this year after five years of contraction.

Executive director Anusorn Muttaraid said Thailand's biggest electronics firm will wait and see how the Indian market performs this quarter and next before deciding whether to proceed with the new plant in Chennai. It would be the company's fourth factory in India.

The facility was originally scheduled to open this year at an estimated investment cost of 500 million baht for assembly of products such as uninterrupted power supplies.

"Indian companies have cut spending, due partly to the economic situation in Europe," said Mr Anusorn.

"We'll probably decide in the fourth quarter whether to invest in the new plant."

India's industry minister is scheduled to visit Delta's plant in Tambon Bang Pu of Samut Prakan province, where management will propose how India can simplify regulations.

At present, India has decentralised its decision-making processes, resulting in time-consuming approval and high costs for investors, said Mr Anusorn.

Henry Shieh, Delta's president, said the company expects revenue generated in Indian to be similar to last year at $100-110 million. Though Delta has dominated the telecom power system market there with a 40% share, sales have continuously edged down from a peak of $125 million in 2007.

"New investment in factories in India for the time being is not as strong as in the past," said Mr Shieh. "Hopefully, a turnaround should be expected from next year onward."

With a permanent staff of fewer than 500 in India, Delta has transformed itself from a telecom to an industrial-type manufacturer and is exploring new opportunities such as solar inverters and power supplies.

In the first three months, Delta posted a 28% year-on-year increase in net profit to 713 million baht, partly on foreign exchange gains. Revenue, meanwhile, slipped by 4% to 8.7 billion baht and 6% quarter-on-quarter as the European solar inverter market remained quiet.

Mr Anusorn said Delta is on track to achieve its revenue target of $1.3 billion this year, representing growth of 10%.

The company has entered new markets in Australia, New Zealand and Southeast Asia to offset slowing European and Indian sales.

Shares of DELTA closed yesterday on the Stock Exchange of Thailand at 23.20 baht, up 1 baht, in trade worth 31 million baht.