Usha Martin Ltd - Rs78.50

Usha Martin Ltd (UML), the erstwhile Usha Beltron Ltd (UBL), the flagship company of the Kolkata based Jhawar group, was promoted in 1986 by Usha Martin Industries Ltd (UMIL) together with Bihar State Electronics Development Corporation in collaboration with AEG Cable of West Germany. UMIL was merged with UBL in 1997 and later the name of UBL was changed to UML in May 2003. As on today, UML is a fully integrated steel manufacturer right from iron ore, coal, power, pig iron to specialised steel, billets, wire rods & wire ropes. It is the second largest steel wire rope maker in the world producing special wire ropes for cranes, elevators, mining, structures, etc and steel cords for conveyor belts. It also manufactures jelly filled telephone cables, which contribute marginally to its total turnover. UML’s manufacturing facilities are located in Ranchi, Jamshedpur, Agra, Bangalore and also in Dubai, UK & Thailand through its subsidiaries. Its steel manufacturing facility at Jamshedpur is one of the largest amongst secondary steel manufacturers of special steel long products in the country.

Few months back, UML commissioned its backward integration project to manufacture 1,00,000 TPA DRI (Direct Reduced Iron) sponge iron plant and also installed a 10MW captive power plant utilizing the waste heat gases for power generation. It has also firmed up plans to expand its steel-making capacity from 2,20,000 TPA to 4,00,000 TPA. Importantly, UML has been allotted a coal block by the Ministry of Coal which has reserves of more than 30 million tonnes. Besides, the company is also pursuing iron ore mining activities. Due to sluggish cable industry, it has modified its cable plant in Ranchi to manufacture value added products such as bright bars, speciality wires and conveyor belt cords. It has bagged huge orders from OTIS for supplying and servicing elevator ropes in Western Europe and Asia except China and Korea for a period of three years. The company has also received a breakthrough in supplying high performance mining ropes to a customer in USA to whom it has been supplying medium-level mining ropes. In a most recent development, UML has acquired JCT's Steel Division manufacturing steel wire ropes and wire products at Hoshiarpur in Punjab for consideration of about Rs21 cr.

As a part of restructuring, it has swapped debt of Rs190 cr. and has brought down the interest cost from 13.5 to 8 per cent. IFC and DEG (Germany) have also extended 10 year loans till FY2013 of USD 21 million and Euro 10 million @ Libor + 2.75 per cent. Given the uptrend in the steel sector, UML posted impressive figures for six months ending 30 Sept. 2004. Its topline grew by 60 per cent to Rs568 cr and NP was up 123 per cent to Rs16.80 cr. Its equity capital is Rs.18.5 cr. and with reserves of Rs.410 cr., the book value of the share works out to Rs.116 on its face value of Rs.5. Since its backward integrated project was commissioned in the latter half only, it could close FY05 with total sales of Rs1100 cr. and NP of Rs40 cr. This works out to an EPS of around Rs11. Investors are advised to buy the scrip on sharp correction with a price target of 110 in the next 12 months.