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Isgec Heavy Engineering has a history of 80 years and is a diversified heavy engineering company with interests in Process Equipment, EPC Power Plants, Boilers, Sugar Plants & Machinery, Mechanical & Hydraulic Presses, Castings, Contract Manufacturing, and Trading.
In FY 2011 the company changed its name from Saraswati Industrial Syndicate Ltd. to Isgec Heavy Engineering Ltd. All businesses were consolidated and now marketed under a common brand name – Isgec.
December 2017 quarter results
Sales for the quarter ended December 2017 stood at Rs 662.81 crore. OPM was at 8.1%. Thus OP stood at Rs 53.95 crore.
Latest sales figures are net of GST and previous are gross of excise and hence not comparable.
Other income fell 60% to Rs 7.53 crore. As interest cost fell 58% to Rs 1.64 crore and depreciation stood at Rs 16.03 crore. Thus PBT went down 36% to Rs 43.81 crore.
Provision for taxation was down 38% to Rs 14.37 crore. Finally PAT fell 36% to Rs 29.44 crore.
Nine months results
For the nine months, sales stood at Rs 1796.50 crore. OPM was at 6.8%. Thus OP stood at Rs 122.07 crore.
Latest sales figures are net of GST and previous are gross of excise and hence not comparable.
Other income fell 2% to Rs 62.87 crore. As interest cost fell 62% to Rs 5.31 crore and depreciation grew 2% to Rs 47.98 crore. Thus PBT went down 33% to Rs 131.65 crore.
Provision for taxation was down 40% to Rs 39.29 crore. Finally PAT fell 29% to Rs 92.36 crore.
Bank guarantee invoked
a) The Company is executing Off-shore and On-shore contracts to design, engineer, procure, construct, commission and deliver a Bio-Refinery project in Philippines.
There was manifestation of latent conditions leading to cost overrun and delay in completion of the project within the contractual delivery date. The Company notified the customer that these risks were to his account under the contract.
- The customer issued directions to progress the project and started paying the additional cost to the sub-contractors directly.
- The project is substantially complete.
- The customer, on 30th January 2018, has invoked Bank Guarantees amounting to Rs. 130 crore, terminated the contract and also claimed damages,
- The Company has filed a petition for stay of the encashment of the Bank Guarantee in the Hon'ble Punjab & Haryana High Court. The Hon'ble High Court has ordered 'Status Quo' till the next hearing fixed for 14th February 2018.
- The Company, in accordance with the contract, has filed application for arbitration under the Singapore International Arbitration Centre and has appointed Lawyers to represent the Company.
h) The legal advice is that the termination of the contract and invocation of the Bank Guarantees is contrary to the terms of the contract and also illegal and wrongful and the customer's claims are not tenable.
Has identified various growth strategy initiatives through slew of technology tie-ups
The company has identified various growth strategy initiatives.
One of the business opportunities identified is Air Pollution Control Equipment. The company has concluded technology tie-up arrangements to cover almost the entire range of Air Pollution Control Equipment required for coal based power plants as also some equipment for other industries.
These include the incorporation of a Joint Venture Company named Isgec Redecam Enviro Solutions Private Limited, with Redecam S.p.A, Italy, for Bag Filters and Hybrid Filters for particulate Matter Reduction in Cement and Steel Plants.
The other technology tie-ups were for Selective Non-Catalytic Reduction Units with Fuel Tech, USA for reduction of Nitrogen Oxide (NOx) in Thermal Power Plants and Cement Plants, and for Wet Flue Gas Desulfurization Units with Babcock Power Environmental, USA for reduction of Sulfur Dioxide (SOx) in Thermal Power Plants.
Technology transfer agreements with regard to other equipment executed in FY 2017 are as under:-
Cement Machinery:
(i) Pyro Processing and Clinker Cooler Units for Cement Plants with Claudius Peters, Germany and Partner Teknik, Turkey.
Presses:
(i) Hot Stamping Presses with AP&T, Sweden.
Water Treatment:
(i) Industrial Waste Water Treatment and Desalination Plants with RWL Water, Israel.
Process Plant Equipment:
(i) Screw Plug Heat Exchangers and Process Waste Heater Boilers with TEi, USA.
(ii) Process Fired Heater with Riley Power, USA.
These tie-ups are expected to result in business in the years to come. No major investments are envisaged for the manufacture of these products.
Valuation
The share price trades at Rs 7700.
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