Bharat Bijlee Ltd - Rs 415.00
Established in 1946, Bharat Bijlee Ltd (BBL) as emerged as one of the leaders in the electrical engineering industry in India. Today, it is mainly engaged in manufacturing of two product ranges namely electric motors and transformers. Infact, company boasts of pioneering the manufacture of electric motors at a time when most electrical equipments were imported. Thus it produces a wide range of standard and customized low-tension motors for various applications. It specializes in three phase Ac induction motors and other special motors like torque motors, loco auxillory, multi speed, low vibration motors etc. It is also one of the oldest players in transformer industry as it began manufacturing transformers way back in 1954. Remarkably, it has the capability to manufacture power transformer up to 200MVA in 220 kV class which handful of Indian manufacturers can claim of. At the same time it also makes distribution, generator, dry type, thyristor duty & locomotive transformers. Besides, BBL has a separate DC drive division which is recognized as the first and largest manufacturer of microprocessor based variable speed drives for batch-type sugar centrifugal machines. Although not so significant but company even trades in anti-corrosive products and submersible pumps. Earlier in 1972, BBL had diversified into manufacture and installation of elevators under brand name Olympus but subsequently divested this business to a subsidiary of Kone Elevators in 2004. Presently, BBL derives nearly 30% revenue from sale of electric motors, 65% from sales of transformers and the balance 5% from trading and other products.
BBL’s manufacturing plant is spread across 50 acre near Kalwa, Mumbai with regional offices at Mumbai, Delhi, Bangalore and Kolkata and a national network of sales and service offices. Importantly, the technology adopted by the company in the field of design, manufacture, quality control & assurance is based on that followed by the world’s topmost German organization in electrical industry i.e. Siemens. Actually, BBL had a comprehensive technical collaboration for the manufacture of transformers and motors with Siemens AG and its manufacturing plant is set up as per Siemens' exacting standards. Infact, company's transformers and motors were originally marketed by Siemens India only, but eventually in 1980 BBL undertook a phased take-over of the marketing of its products. In short, replicating the German standards and modifying to suit Indian and other specified International operational conditions, BBL truly offers world class products. On the capacity front, BBL has recently increased its transformer manufacturing by 40% to 11,000 MVA from 8000 MVA earlier. The additional revenue from this expansion is expected to start pouring in from Q4FY09. On the other hand, company has ongoing investments for the manufacture and testing of large motors, specifically catering to high-growth market segments in higher frame sizes and output ratings. It has also recently increased the motor capacity to 1.7 million HP from the current 1 million HP per annum. In order to expand its product range, company has lately added AC variable speed drives and gearless machines to its portfolio for which it has tied up with KEB of Germany and Permanent Magnets Spain. Notably, BBL has even formed a Project division to undertake turnkey projects for outdoor EHV & HV switchyards, indoor sub-stations, overhead and under ground distribution systems, industrial electrification, power evacuation systems for power projects etc.
In order to expand its product range, company has lately added AC variable speed drives and gearless machines to its portfolio. It has entered into an exclusive distributorship and service agreement with K.E.B. of Germany for A.C. variable speed drives. These drive systems enable precise positioning, control, starting and stopping of complex machinery in customized configurations, and have significant synergies with the electric motors business. At the same time, company's technology transfer agreement with Permanent Magnets, Spain, has enabled it to be the first manufacturer in India of synchronous permanent magnet gearless machines for elevators, including those without machine rooms. These machines use revolutionary technology and offer significant advantages in compactness, energy efficiency, controllability and low noise to elevator manufacturers and their customers. Notably, BBL has even formed a Project division to undertake turnkey projects for outdoor EHV & HV switchyards, indoor sub-stations, overhead and under ground distribution systems, industrial electrification, power evacuation systems for power projects etc.
With govt putting special thrust on investments in accelerated development programme of power generation, transmission and distribution capacities, future prospect of electrical equipment manufacturers like BBL looks very promising. The demand for transformer is estimated to maintain its healthy double digit growth rate for next 2~3 years at least. Secondly, company is also looking to increase the export of transformers to countries like Indonesia, Phillipines, UAE, Egypt, Jordan, Oman, Bangladesh, Nepal, etc. Whereas on the other hand the outlook for electric motor doesn’t look so robust for the company and may report de-growth in near future. But it will be more than compensated by the increased capacity of transformer. On the operational front, BBL has been facing margin pressure from last six months due to substantial rise in raw material cost. Accordingly it may post disappointing nos for the Dec quarter as well, but from March quarter things will improve as the raw material cost has come down considerably. So for entire FY09 it is expected to clock a turnover of Rs 600 cr and PAT of Rs 50 cr i.e. EPS of Rs 88 on tiny equity of Rs 5.65 cr. Hence it may declare a dividend of Rs 20 which leads to a yield of 5% at CMP. Besides company is quite ripe for bonus as it has huge reserve to the tune of Rs 160 cr (i.e. book value of Rs 298) on such a small equity. Importantly, BBL is almost a debt free company and even has liquid investment whose current market value as on date is Rs 125 cr against the investment value of nearly Rs 5 cr. Thus at current market cap of Rs 225 cr, BBL is effectively available at merely Rs 100 cr (i.e. Rs 175 per share). Because of bad market sentiment coupled with dismissal performance by the company, share price has fallen by around 90% from the high of Rs 3340 in Jan’2008. Investors are strongly recommended to buy at current levels for a handsome gain of nearly 50% within 12 months.
BBL’s manufacturing plant is spread across 50 acre near Kalwa, Mumbai with regional offices at Mumbai, Delhi, Bangalore and Kolkata and a national network of sales and service offices. Importantly, the technology adopted by the company in the field of design, manufacture, quality control & assurance is based on that followed by the world’s topmost German organization in electrical industry i.e. Siemens. Actually, BBL had a comprehensive technical collaboration for the manufacture of transformers and motors with Siemens AG and its manufacturing plant is set up as per Siemens' exacting standards. Infact, company's transformers and motors were originally marketed by Siemens India only, but eventually in 1980 BBL undertook a phased take-over of the marketing of its products. In short, replicating the German standards and modifying to suit Indian and other specified International operational conditions, BBL truly offers world class products. On the capacity front, BBL has recently increased its transformer manufacturing by 40% to 11,000 MVA from 8000 MVA earlier. The additional revenue from this expansion is expected to start pouring in from Q4FY09. On the other hand, company has ongoing investments for the manufacture and testing of large motors, specifically catering to high-growth market segments in higher frame sizes and output ratings. It has also recently increased the motor capacity to 1.7 million HP from the current 1 million HP per annum. In order to expand its product range, company has lately added AC variable speed drives and gearless machines to its portfolio for which it has tied up with KEB of Germany and Permanent Magnets Spain. Notably, BBL has even formed a Project division to undertake turnkey projects for outdoor EHV & HV switchyards, indoor sub-stations, overhead and under ground distribution systems, industrial electrification, power evacuation systems for power projects etc.
In order to expand its product range, company has lately added AC variable speed drives and gearless machines to its portfolio. It has entered into an exclusive distributorship and service agreement with K.E.B. of Germany for A.C. variable speed drives. These drive systems enable precise positioning, control, starting and stopping of complex machinery in customized configurations, and have significant synergies with the electric motors business. At the same time, company's technology transfer agreement with Permanent Magnets, Spain, has enabled it to be the first manufacturer in India of synchronous permanent magnet gearless machines for elevators, including those without machine rooms. These machines use revolutionary technology and offer significant advantages in compactness, energy efficiency, controllability and low noise to elevator manufacturers and their customers. Notably, BBL has even formed a Project division to undertake turnkey projects for outdoor EHV & HV switchyards, indoor sub-stations, overhead and under ground distribution systems, industrial electrification, power evacuation systems for power projects etc.
With govt putting special thrust on investments in accelerated development programme of power generation, transmission and distribution capacities, future prospect of electrical equipment manufacturers like BBL looks very promising. The demand for transformer is estimated to maintain its healthy double digit growth rate for next 2~3 years at least. Secondly, company is also looking to increase the export of transformers to countries like Indonesia, Phillipines, UAE, Egypt, Jordan, Oman, Bangladesh, Nepal, etc. Whereas on the other hand the outlook for electric motor doesn’t look so robust for the company and may report de-growth in near future. But it will be more than compensated by the increased capacity of transformer. On the operational front, BBL has been facing margin pressure from last six months due to substantial rise in raw material cost. Accordingly it may post disappointing nos for the Dec quarter as well, but from March quarter things will improve as the raw material cost has come down considerably. So for entire FY09 it is expected to clock a turnover of Rs 600 cr and PAT of Rs 50 cr i.e. EPS of Rs 88 on tiny equity of Rs 5.65 cr. Hence it may declare a dividend of Rs 20 which leads to a yield of 5% at CMP. Besides company is quite ripe for bonus as it has huge reserve to the tune of Rs 160 cr (i.e. book value of Rs 298) on such a small equity. Importantly, BBL is almost a debt free company and even has liquid investment whose current market value as on date is Rs 125 cr against the investment value of nearly Rs 5 cr. Thus at current market cap of Rs 225 cr, BBL is effectively available at merely Rs 100 cr (i.e. Rs 175 per share). Because of bad market sentiment coupled with dismissal performance by the company, share price has fallen by around 90% from the high of Rs 3340 in Jan’2008. Investors are strongly recommended to buy at current levels for a handsome gain of nearly 50% within 12 months.
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