Electrotherm India - Rs.223.00

Electrotherm India Ltd. (EIL) was promoted by technocrat Mukesh Bhandari in 1986 to manufacture induction furnaces for the Steel Industry. Since then, it has become a trusted name in the foundry and steel industry with over 1500 installations and its product being exported to Greece, Kenya, Mauritius, South Africa, Ethiopia, Tanzania, Zimbabwe, the Middle East and many other East African countries. Its operations are spread over 30 locations with 6 regional offices and representations in Bangladesh, China, Egypt, Malaysia, Pakistan, Russia, South Africa and Turkey. EIL currently has three divisions offering different products and services as follows:

Engineering and Capital Equipment Division which caters to ferrous & non-ferrous foundries and metal melting industry by manufacturing medium frequency Induction Melting Furnaces, Metal Refining Konverter, Ladle Refining Furnace, Induction Heating/Hardening Equipments, Submerged and Electric Arc Furnace and a host of allied products. Identifying China as a huge growth opportunity, EIL has decided to set up a manufacturing base in district Tianjin of China to manufacture induction furnaces and other metallurgical equipment for the Chinese market and for which the company has already been allotted land at Beichen Industrial Park, Tianjin.

Steel Division manufactures pig iron, cast iron, sponge iron, TMT bars, billets and ductile iron pipes which contribute nearly 50% of the total revenue. The company is in the process of implementing a massive project at Kutch to be completed by the year 2007. Once fully commissioned, EIL will have the capacity to produce 1,50,000 TPA of construction steel, 1,50,000 TPA special steels including stainless steel and alloy steel and 1,00,000 TPA of Ductile iron pipes. The company has also embarked on establishing a Waste Heat Power plant of 30 MW. Hence with backward integration of sponge/pig iron and with the installation of captive power plant, EIL will become one of the lowest cost construction steel producers.

Electric and Hybrid Electiric Vehicle Division: EIL’s Automotive Division, Indus Elec-trans, manufactures eco-friendly electric two wheelers which sells under the brand name of ‘Yo-Bykes’. These non-polluting and economical bikes run a rechargeable battery and do not need petrol or licence or registration. Within 6 months of its launch, Yo-bykes are huge success in Gujarat as it cost only 15-18 paisa per km and the demand is pouring in from all over the country. Its plant at Samakhyali, Kutch, has a capacity to manufacture 1,20,000 bikes per year but the plan is to increase its capacity to over 5,00,000 bikes. Notably, most of the components are produced at its own plant except the batteries and motors, which are imported from Taiwan, Germany and Japan. To expand further, EIL is working on development of Electric three-wheelers, four wheelers and hybrid electric low floor buses.

To fund its huge expansion, the company is planning to raise around Rs.100 cr. by issue of equity shares through preferential placement or FCCB route, which may dilute the equity to the extent of 100%. For FY06, its sales grew by 90% to Rs.345 cr. whereas PBT increased by 50% to Rs.22.40 cr. However, on the back of huge deferred tax provisioning of around Rs.7.50 cr., net profit declined by 10% to Rs.12 cr. recording an EPS of Rs.25 on its small equity of Rs.4.77 cr. Considering the company’s expansion plan and foray into electric vehicles. FY07 may end with a turnover of around Rs.475 cr. and profit of Rs.28 cr. resulting in an EPS of Rs.32 on its estimated diluted equity of Rs.8.75 cr. Investors are advised to buy this scrip at sharp declines as it can give 25%-30% return in a year’s time.