Rajratan Global Wires - Rs109.00

Belonging to the Chordia Family of Indore, Rajratan Global Wires was originally promoted in technical and equity collaboration with Gustav Wolf of Sweden in 1991 and was known as Rajratan Gustav Wolf Ltd. Later in 2003, the Indian promoters bought out the Swedish stake and changed the company’s name to Rajratan Global Wires Ltd. Today, it is the second largest tyre bead wire & pre-stressed concrete wire manufacturing company in India. Tyre bead wire is a carbon bronze-coated wire used in tyres. Its main function is to hold the tyre on the rim and to resist the action of the inflated pressure, which constantly tries to force it off the rim. In India, there are only 3 manufacturers of tyre bead wires of which Rajaratan enjoys around 30% market share and aims to increase it to become the market leader. It supplies to almost all tyre manufactures like MRF, Ceat, JK, Goodyear, Apollo, Falcon, TVS etc. in India and to Bridgestone, Dunlop, HWA Fong, Kerman Tyres etc. internationally. Rajratan is the first wire manufacturing company in the country to achieve ISO/TS 16949:2002 certification from TUV Rheinlend, Germany

Its plant is located at Pithampur, 30 kms from Indore, with an installed capacity of 20,000 MTA of Tyre Bead Wire and 10,000 MTA of P.C. wire. Due to boom in the auto sector, the demand for tyres is very high both from OEM manufacturers and the replacement market, which leads to higher demand for tyre bead wire. Moreover, given the expansion plans of most of tyre companies domestically and internationally, the demand for tyre bead wire will be even more in the future. The company has already received approvals for supplies from major global manufacturers such as Bridgestone, Goodyear and Michelin. To meet this increasing demand, the company has capex plans of Rs40 cr. to increase manufacturing capacity to 30,000 MTA by the end of 2005. With all these initiatives, the company intends to enhance its export share to 50% in the next 3 yrs. from the current 6%.

To fund its capex, the company has approved an issue of about 6, 00,000 shares to Ashok Dalmia at Rs102 on a preferential basis. For the nine months ending 31 Dec. 2004, its Net Sales increased by 40% to Rs63 cr. and NP jumped 80% to Rs4.80 cr. recording an EPS of Rs13. Considering its order book position and the thrust on exports, Rajratan can post Sales of Rs90 cr. and NP of Rs6.80 cr., which works out to an EPS of Rs16. For FY06. It may post an EPS of more than Rs.20 on its diluted equity. Investors are advised to buy at current levels with a price target of Rs180 in 15 months.