Transformer & Rectifiers India Ltd - Rs 125.00

Incorporated in 1994, Transformer & Rectifiers India LTD (TRIL) is one of the few manufacturers in the country manufacturing the entire range of transformers namely power generation, transmission and distribution transformers, industrial transformers such as furnace transformers, and special transformers such as mobile substation, rectifiers, testing transformers etc. Infact, company is among the largest manufacturer of furnace transformers in India. Notably, TRIL has developed the products based on its in-house design and engineering capabilities, without any third party technical collaboration or assistance. Company caters to a wide spectrum of transformer users in various industries such as petrochemicals, oil refining, cement, paper and pulp, pharmaceuticals, automobiles, steel, alloy plant, power plant, railway applications, mining, minerals, among others. Presently, it derives nearly 70% of revenue from sales of transformers to utilities and the balance 30% comes from direct sales to industrial clients. TRIL’s clientele includes SEB’s of Gujarat, Rajasthan, Maharashtra, Tamilnadu, MP & AP, PowerGrid Corp, NTPC, IRCON, Siemens, ABB, Jindal Steel & Power, AIA Eng, Suzlon, Rohit Ferro etc. Besides, company also exports to countries such as the England, Canada, United Arab Emirates, South Africa, Saudi Arabia and Indonesia. Till date, company boasts of installing round about 5000 transformers across the globe.

Currently, TRIL is operating through two manufacturing units - Changodar & Odhav in Ahemdabad with an installed capacity of 6000 MVA and 1200 MVA respectively and has the capability to manufacture transformer upto 160 MVA in 245 kV class. In order to backward integrate the operations, company recently acquired stakes in two group companies namely Transweld Mechanical Engineering Works Limited and Transpares Limited. One is engaged in manufacturing of transformer tanks and core channels whereas other is manufacturer of pressed steel radiators, which is one of the key components involved in transformer manufacturing. Further, to cash on the huge opportunity in power sector and fulfill the rising demand for transformers, TRIL is undergoing an aggressive capex of nearly Rs 70 cr to triple its production capacity. It is in the process of setting up a Greenfield plant in Moraiya, near Ahmedabad with an installed capacity of 16,000MVA. The new plant which is expected to be operational by March’09 would be capable of manufacturing transformers upto 756kV class, though the company initially intends to manufacture transformers of 220kV and 400kV classes. And as higher kV category transformers command better realization, company’s margin is bound to improve going forward. Moreover, in future TRIL is also contemplating to take up turnkey projects for setting up of sub-stations, that form a part of the power transmission and distribution networks, where it has developed in-house engineering capabilities. As of now, company has order book position of Rs 383 cr, out of which 70% comprises of power transformers.

To fund its expansion plan and part finance the incremental working capital requirement, during Dec 2007 TRIL came out with an IPO of 29.95 lac equity shares at a price of Rs 465/- per share aggregating to Rs 139 cr. Remarkably, the issue got an overwhelming response from the public as it was oversubscribed by 91x times. And more interestingly, the same share is now available at 75% discount to its issue price. This is despite the fact, company has been doing exceedingly well. Even for the latest Sept’08 qtr, its sales as well as net profit increased by 60% to Rs 114 cr and Rs 12.70 cr respectively. For H1FY09, it has already clocked an EPS of Rs 17 as it recorded 55% growth in sales to Rs 195 cr and 75% jump in PAT to Rs 22 cr. With company now focusing on higher kV category transformers coupled with drastic fall in copper prices, the future prospect looks promising. Meanwhile it may end FY09 with sales of Rs 400 cr and NP of Rs 36 cr i.e. EPS of Rs 28 on current equity of Rs 12.90 cr. But importantly, once its Moriya plant becomes operational it will report substantial jump in sales & net profit for FY10. Hence long term investors are strongly recommended to buy at current levels as share price has the potential to double in 12~15 months.

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