Sujana Towers Ltd 22.00

Incorporated in 2006, Sujana Towers Ltd (STL) was actually formed on demerger of the tower division from Sujana Metal Products Limited pursuant to the scheme of arrangement and amalgamation. It belongs to the well known Sujana group which has diversified interest in steel, domestic appliances, engineering, transmission towers etc. Hence STL is basically into designing and manufacturing of telecommunication and hi-tension transmission towers. Its main products include power transmission line towers (from 11 KV to 400 KV) and telecom towers (selfsupporting lattice towers upto 100 metres height, triangular/square cross-section, hybrid towers, angular/tubular towers, lattice Guyed masts and monopoles). It is the only integrated tower manufacturer in south India having an in-house re-rolling facility for structural steel & fabrication of tower and tower parts. Thus it has the capability to deliver ready-to-erect structures in customer-specified sizes in the shortest time spans. Notably STL is India’s largest galvanized steel tower manufacturer as it has a galvanizing plant which makes only galvanized tower to impart strength, longevity and resistance against atmospheric impact and peeling. Lately, to cash on its engineering skills and sound technical knowledge, STL has forayed into providing services like Engineering & Consultation, Turnkey Installation and Inspection & Maintainance. Thru joint venture with EPC companies like Deepak Cables, Annapurna Const, company is already executing turnkey EPC projects in power segment and aims to emerge as turnkey contractor in next couple of years.

Presently, STL has the manufacturing plant at Hyderabad, Andhra Pradesh with a galvanized tower manufacturing capacity of 128,125 MTPA while its heavy structural steel product capacity stands at 70,000 tonne per annum. Notably, the unit boasts of manufacturing transmission towers on turnkey basis (i.e. surveying, civil foundations, supply and erection of towers, stringing of conductors, commissioning and charging of lines) to electricity boards of Andhra Pradesh, Karnataka and Tamil Nadu and Power grid. Besides it has a huge clientele in private sector including Reliance energy, BHEL, Subhash Project and all the telecom companies like Rcom, Bharati, Idea, BSNL, GTL, Essar, Tata tele, Erricson etc. India currently has about 200,000 telecom towers and is estimated to need about 350,000 more towers in next five year. On the other hand power sector is undergoing a massive expansion coupled with rural electrification to achieve power for all by 2012. Hence to cater to the rapidly increasing demand, company is in the midst of setting up a Greenfield plant in Chennai with an installed galvanized tower manufacturing capacity of 100,000 MTPA. This plant will also have the facilities to manufacture high mast light poles, railway electrification structures etc and will also cater to export requirements. Due to liquidity crunch, project is expected to start operation by mid 2009 thereby taking company’s total capacity to 228,000 MTPA.

For future STL is looking to put up a new plant in Gujarat to produce galvanized steel parts with a capacity of 75,000 MTPA. Company is also contemplating to acquire a company in China for manufacturing of tower parts and set up a subsidiary in Hong Kong for sourcing cheaper raw material. Recently STL has acquired 51% shareholding in Telesuprecon Ltd a Mauritius based company, undertaking telecom infrastructure contracts in various cast/central African countries. Earlier in Oct 2007, company made a pref allotment of 80 lac warrants to be converted into equity @ 137 per share, out of which 25 lac warrants have been converted. For the trailing twelve months ending June 2008, it earned a NP of Rs 46 cr on sales of Rs 582 cr leading to an EPS of Rs 11 on current equity of Rs 20.80 cr having a face value of Rs 5/- per share. However, company has recently taken the extension to end the financial year in Sept 2008 with 15 months performance. With govt special thrust on power sector and strong growth in telecom sector, the future prospect of STL is very optimistic. Secondly the recent fall in steel and other raw material prices will relieve some pressure on profit margin going forward. Ironically, the scrip which hit a high of Rs 235 in Jan’08 has now collapsed by more than 90% due to poor market sentiment. Although company is facing difficulties in raising fresh capital to fund its expansion and working capital still investors are strongly recommended to buy at current levels as scrip can triple within 15 months.

Click here to download Report (PDF)