Techno Electric & Engineering Co Ltd - Rs 100.00

Incorporated in 1963, Techno Electric & Engineering Co Ltd (TEECL) is a large engineering, procurement and construction (EPC) contracting company primarily focused on the Indian power sector. Ironically, it has worked in one capacity or other in setting up of more than 50% of the power generating capacity in the country (more than 50,000 MW) and has similarly participated in building more than 50% of National Grid for execution and transmission of power from one region to another. Company has presence in all the three segments of power sector i.e. generation, transmission and distribution. It is among the very few Indian companies to have license to execute electrical installations upto 400 kV. Although majority of its revenue comes from govt bodies or PSU but it caters to private sector as well and has an enviable clientele including all power giants such as NTPC, Power Grid, NHEPC, BHEL, APTRANSCO, MSEB, Reliance Energy, ABB, Alstom, Thermax, Delhi Vidut board, CESC, IOC, Nalco and various other State Electricity Board. Company has even executed a turnkey power project with GE of USA for Damodar Valley Corporation and subsequently has won the confidence of other multinationals like ABB and ROLLS ROYCE amongst others, as an associate for their IPP Projects in India. Over the years TEECL has groomed itself in the field of comprehensive engineering, procurement and construction services for fuel oil storage and handling system, comprehensive piping systems, process plant installation, fire protection systems, EHV switchyards, EHV sub stations, power plant cabling system, plant electrical distribution system, lightning protection system and plant illumination systems. It has capabilities in setting up small capacity power plants and executing balance of plant jobs for larger capacity thermal/hydro power plants. It also possess specific domain knowledge that enables it to serve the steel, fertilizer, metals and petrochemicals sectors along with specialized jobs in diversified manufacturing.

Till date TEECL has successfully executed nearly 300 projects including power project, electrical projects or civil, structural and civil work. Out of these most of them were quite prestigious and large scale projects. The reason for company’s success is the adoption of state-of-the-art technology in the form of computerized engineering services, mechanized field operations, high standards of quality management backed by strong human resources and resourceful financing. Infact TEECL has been an acknowledged force vis-a-vis safety and statutory requirements for design, engineering and construction framed by the Indian Statutory Authorities such as the Inspectorate of Boilers, Chief Controller of Explosives, Tariff Advisory Committee for Fire Protection, Inspectorate of Electrical Installation among others. Today TEECL is actively involved in APDRP and Rajiv Gandhi Rural Electrification Program of Govt. of India. It boast of having an unexecuted order book position of more than Rs 500 cr. Besides company has participated in many other prestigious tenders out of which it is L1 (lowest) bidder in few of them.

As a part of its diversification strategy, TEECL has ambitious plan to be a major power producer in the field of non-conventional energy through setting up of biomass power generating units all over the country. Initially company has already obtained licenses for two units and is now setting up 10/12 MW Bio-Mass based power plants, one in North Dinajpur District of West Bengal and the other in Rajgarh District of Madhya Pradesh. These projects are slated to complete before March’2010. This new business segment of the company has tremendous potential because by 2012 most of the electricity boards will be compulsorily required to source 10% energy from non-conventional sources as per rules of the Electricity Act. On the other hand TEECL has also been selected as a Franchisee' for power distribution by Dakshin Haryana Bijli Vitran Nigam, Haryana. The total load involved is 85 MVA with a consumer base of +55000. TEECL is expected to increase the collection and decrease the T&D loss on the back of better governance and proper control to make a better distribution network.

Unfortunately, in the power sector the generation capacity addition has not been in commensurate with the increase in demand for power. After dismal performance in the 10th plan the government has set another ambitious target for the 11th plan of 78577 MW. In the first year of the plan i.e. 2007-08 an addition of 9263 MW was made which is again 57% of the target of 16336 MW. Although the annual rate of capacity addition has improved significantly over last 2 years, it has to double to meet the ambitious target set for the 11th plan period. However the silver lining is the projects over 53300 MW are under construction comprising 68% of the total 11th plan target. Similarly, the matching transmission and distribution systems will be augmented in due course. The National Grid is being upgraded to 765 kV and the State Grids are being upgraded to 400 kV to reduce the T&D losses. Moreover, to achieve the inter-regional power transmission capacity of 37150 MW by 2012 through creation of transmission super highways, the govt plans to set up a number of 765 KV Sub-Stations interconnected with matching transmission lines. And with TEECL being one of the major players is bound to benefit from such massive investments.

Financially, TEECL has been doing exceedingly well. Even for the latest March’09 quarter it reported satisfactory nos as PBT increased by more than 10% to Rs 28 cr despite 20% fall in revenue to Rs 117 cr. But due to higher tax cost its PAT reportedly declined by 5% to Rs 19.50 cr in comparison to corresponding quarter last year. Notably company reported a very healthy OPM of 16% for the quarter which is a very quite heartening. Thus for the entire FY09, TTECL was able to clock 30% growth in net profit to Rs 62 cr, whereas topline grew by 15% to Rs 485 cr. This translates into an EPS of Rs 11 on equity of Rs 11.40 having face value as Rs 2 per share. Being a very low capital intensive business, company has a very small gross block of less than Rs 10 cr. It is not only a debt free company but a cash rich company having liquid investment worth Rs 150 cr and cash balance of approx Rs 25 cr which is equivalent to almost Rs 30 per share. Investors are strongly recommended to buy at sharp declines with a price target of Rs 150 in 15~18 months.

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