Artson Engineering - 40.00

Established in 1978, Artson Engineering Ltd (AEL) is basically engaged in business of manufacturing tanks and terminals for refineries and petroleum companies. It is one of the foremost companies in the country, specializing in petroleum storage and handling systems. AEL has the capabilities in multi disciplinary construction for the hydrocarbon process industry and primarily caters to oil & gas, power & energy, food processing industry etc. Apart from taking EPC (engineering, procurement and construction) contracts, it also offers construction services in mechanical, civil, electrical and instrumentation field. AEL can boast of successfully commissioning hundreds of projects on the turnkey basis in India as well overseas. Few of AEL`s esteemed clients are IOC, HPCL, IPCL, GAIL, Lubrizol, L&T, Reliance Ind, Alfa Laval, BARC, Cadbury etc. It has also supplied equipments related to power projects to reputed clients like BHEL, NTPC, MSEB, Uri Civil, Enercon, Siemens, ABB, Alstom etc. Interestingly, company also has a manufacturing unit, located at Nasik, Maharashtra which has the capability to manufacture heat exchangers, finfan coolers, pressure vessels, LPG bottling plant equipments, bullets and other chemicals process equipments.

However, currently AEL is a BIFR company. Few years back due to failure of Essar Refinery-Jamnagar, company lost nearly 17 cr and was declared sick. Since then it is operating at reduced capacity due to non-availability of bank guarantees and other funding facilities. A number of tenders received by the company could not be taken advantage in view of financial constraints. The company, which use to execute more than 150 cr orders, reported only 14 cr revenue for FY06. But now its debt restructuring scheme has been approved by BIFR under which the 22 crore debt (out of 40 cr) has been waived off by the lenders. The remaining debt of Rs 18 crore has to be paid off in some 5 years without any interest on the same. More importantly, Tata Projects - a part of Tata group will soon be acquiring a controlling stake in the company by infusing fresh capital. Apart from having a healthy order book position or more than 40 cr, AEL along with Tata Project has bid for around 300 cr contract in India and UAE combined. To conclude, company is poised for a strong turnaround once Tata Project takes the command.

For the year ending Sept 2006, AEL reported total revenue of 14 cr and net loss of 1.40 cr. It made an operating loss to the tune of 1 cr. However for six months ending March 2007, it has already made a smart turnaround by reporting operating profit of 3.50 cr on total revenue of 18.40 cr. Hence it clocked a healthy OPM of 19%. As no interest is to be paid, its NP stood at 3.10 cr. Accordingly, it is expected to end FY07 (Sept ending) with a topline of 40 cr and profit of 5.50 cr i.e. EPS of 6 Rs on equity of 9.20 cr. Due With the brand advantage of Tata group, good funds flow and its own technological capability it can earn a profit of 11.50 cr on revenue of 75 cr which means EPS of 12 Rs for FY08. Long term investors are strongly recommended to buy at current levels as this scrip can double in a year’s time.