Indo Asian Fusegear Ltd - 165.00 Rs

From a modest beginning in 1958 by Mr. V.P. Mahendru, Indo Asian Fusegear Ltd (IAFL) has today, grown into a multi-product, multi-location company specializing in manufacturing and marketing a wide range of high-tech electrical products used for distribution, protection, control and conservation of electrical energy. Infact it enjoys the status of being the first company in India - to introduce miniature circuit board in homes, to produce residual current-operated circuit breakers with internationally recognized CB certification, to manufacture energy efficient compact fluorescent lamps and the only one to produce ROHS (Restriction of Hazardous Substances) compliant i.e. less mercury CFLs. Broadly, company deals in two segments - switchgear and lighting of which former contributes around 80% of the revenues and the balance 20% comes from lighting segment. Under switchgear division, it produces hundred of products such as MCB, MCCB, RCB, distribution boards, SPD, HRC fuses, cubicle switch, onload changeover, rewireble switches, feeder pillars, modular switches, wiring accessories etc. It also manufactures special application products like time switches, contactors, MPCB, relays, plug & socket etc. Under lighting category it deals in CFL, FTL (Fluorescent Tubular Lamps), domestic luminaires and commercial luminaires. Notably, IAFL is the largest manufacturer of CFLs and MCB’s in India. Besides, it is among the largest exporter of circuit protection equipments and CFLs to European countries including UK, Germany etc and Middle East, South Africa, Srilanka and Australia. As on today, exports contribute round about 20% of total sales.

IAFL boast of having eight plants across Punjab, Haryana, UP, HP and Uttrakhand out of which five are dedicated for switchgear production, two for lighting business and one for wires & cable. Importantly, its new CFL & switchgear plant in tax free zone of Haridwar with a capacity of 10 & 15 million units respectively has started production recently only. With commencement of these facilities company has enhanced its production capacities substantially and expects to grow at a CAGR of 75~80% for next 2~3 years. It has entered into various technical and strategic tie-ups with international majors like Indo Kopp, Nordex Lighting, Theben, Woertz, Lovata electric etc. Notably, its brands like “Indo Asian”, “Indo Kopp” “Ecolite” & “Hausmann” are associated as quality products and are very well accepted not only in domestic market but globally as well. To compliment this, company has a wide geographical market coverage including 30 offices across India, 850+ distributors, 35000+ electrical retail outlets and overseas offices in Dubai & Germany. To tap the nearby countries, company has made some arrangement with the local players to distribute its products in Nepal and Srilanka. On the other hand, earlier it made a tie up with Brilliant AG-Germany for marketing their complete range of modern style indoor and outdoor lighting equipments, fittings & accessories in India.

As a part of diversification, IAFL is venturing into cables & wires manufacturing business and has recently promoted a subsidiary to implement Rs 100 cr project in phases. Further it has set up another wholly owned subsidiary to undertake power distribution projects on behalf of state electricity boards, corporations and utilities on franchise basis and has already secured two contracts for a period of three years aggregating to Rs 50cr from the electricity board of Madhya Pradesh for distributing power in Jabalpur. Meanwhile, company has set up a JV (51:49) with Simon-Europe to manufacture and market high quality wiring accessories, building automation and intelligent switching systems, especially for industrial and commercial use. This will be one of its kind plants in India which is being set up in Uttrakhand at an initial project cost of Rs. 30 cr and is estimated to commence operation by mid 2008. Moreover it is also putting up a facility in Saudi Arabia - in joint venture with Saudi National Glass, for manufacturing of CFLs and high intensity discharge lamps (HID Lamps), with an investment of Rs 20 cr.

In short, to leverage the burgeoning opportunities in the Indian and global power industry, IAFL has aggressively ramped up its production capacity and is diversifying into emerging business opportunities like home & building automation products, power distribution projects & wires/cable business. It is at the inflexion point and will report bumper nos for the FY09 on back of increased capacity and improved capacity utilization. Meanwhile for FY08, on a conservative basis it is estimated to clock a turnover of more than Rs 300 cr and PAT of Rs 20 cr i.e. EPS of Rs 14 on current equity of 14.60 cr. But it has the potential to post Rs 24 EPS for FY09. However company is looking to raise nearly Rs 200 cr thru equity route to fund its future growth plans which may dilute the equity substantially going forward. Despite this, investors are advised to buy at current levels for a price target of Rs 250 (50% appreciation) in 9~12 months.

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