Sujana Universal Industries - Rs.25.75

Sujana Universal Industries Ltd (SUIL) was originally incorporated as Sujana Domestic Appliances Ltd in 1986 to manufacture fans, washing machines and other consumer durables. Subsequently the name was chnaged to Sujana Industries Ltd and last year it acquired the current name. SUIL is the flagship company of the Hyderabad based Sujana Group. It is engaged in the business of domestic appliances, bearings, castings and international trade.

Under the domestic appliance division, its ‘Padmini’ ceiling fan and 'Zephyre' designer fan are among the largest selling celing fans in South India, which are also exported to over 15 countries. Apart from manufacture for sales, the company also undertakes job work by producing for others. Under its bearing division, SUIL manufactures high quality ball bearings and taper roller bearings with the latest technology on imported machines. With the resultant rise in demand and higer price realisation, the company has increased its production capacity to 10 million bearings per annum and intends to increase it further through internal accruals. Its Castings Division has two induction furnaces with an installed capacity of 26,000 TPA. This division is doing extremenly well and manufactures 2,500 MT of Alloy Cast Iron, 600 MT of Mechanite Castings and 1,500 MT of Ductile Castings. It also produces special cast iron for use by Sujana Metal Products Limited, another group company.

To encash on the growing economy, the management has turned aggressive about future growth and has taken a several positive initiatives. The promoters have infused fresh capital of around Rs.3.5 cr. and the company is now planning to come out with a GDR/FCCB issue of USD 20 million in the near future. It is trying hard to restructure its high cost debt and reduce the interest cost burden, which will boost its bottomline substantially. A few months back, the company has successfully commissioned facilities for the manufacture of telecom and transmission towers with an installed capacity of 1,000 tonnes per month. Recently, SUIL has got the approval from Andhra Pradesh State Road Transport Corporation as suppliers for taper roller bearings and ball bearings. Importantly, the company has also been approved by the Tecumseh Inc. of USA, the world leader compressors for Air Conditioning & Refrigeration by supplying it specially developed precision ground components. Last month, Schneider Electric, an international giant in the field of industrial automation and switchgear, has selected the company for developing precision engineering components.

Although, the company is not very strong financially but considering the various developments and future growth prospects, it is a good bet for the long term. For FY05 ending 30th June 2005, it may register a turnover of Rs.900 cr. and bottomline of Rs.9 cr. leading to an EPS of Rs.4.50 on current equity of 20 cr. This NP figure is arrived after providing for Rs.37 cr. as interest, which is calculated at 14% p.a. In case its GDR is approved, the interest rate may come down to 8%, which will result in saving of Rs.15~18 cr. per annum. Hence only long term and patient investors should buy this scrip with a price target of Rs.50 in 12~15 months.