Capitaline

Analyst Meet / AGM 21-Jan-10

AGM

Walchandnagar Industries

The company plans to raise around Rs 100-120 crore from first round of QIP

The AGM was chaired by Mr Chakor Doshi, the chairman of the company and MD, Mr. Chirag Doshi was also present. Highlights:-

The company has the capability of manufacturing the entire range of nuclear equipments and setting up the entire nuclear plant. The company also has strong capability to manufacture steam boilers upto 250 tpd, where it has technology tieup with FoosterWheelar. The company is traditionally engaged in manufacturing equipments and constructing the entire plants of sugar industry, cement and mining processing industry.

The company as any other engineering company suffered slowdown and delay in execution of projects in FY'09 ending Sep'09, thus resulting in lower sales and profits. The good news is that the company is confidant that worst is over, but the bad news is that the execution is yet not picked up.

For first quarter ended Dec'09, the net sales grew by 20% to Rs 116.49 crore, while the PAT grew by 12%. According to the management, the execution of orders is recovering but the pace is yet slow. According to the management there will be sequential steady growth in sales and profitability, but the best time is yet to come.

The company has capacity and in-house technology to manufacture the entire equipment part of nuclear power equipments. Ie, entire hardware body and its related components. The company during last year, supplied critical equipments and participated in launch of India's first moon mission-Chandrayaan-1 and India's first nuclear powered submarine-INS Arihant. The company is not into the software or the electrical parts in nuclear energy.

The company has an order book of Rs 1463 crore as on 30^th Sep'09 as against Rs 1219 crore in the corresponding previous period last year. The order book includes export order of Rs 450 crore.

The margins in sugar EPC business are typically lower and this has got nothing to do with sugar prices. Of course the orders would come only if sugar companies are making money and expanding, but this has got nothing to do with Walchandnagar's operating margin. Out of the total order book order from sugar sector is around Rs 250 crore. Margins in other sectors like cement, Nuclear, mineral processing, power are high. The company is slowly moving towards high margin sectors and 10% EBIDTA margin is very much possible for FY'10 ending Sep.

So far the company used to incur capex of around Rs 10-12 crroe every year. However from now on the capex will increase tremendously. Largely, this will be for setting up manufacturing base of nuclear energy, aerospace and power sector equipments. Company has already acquired land of 57 acres at Dahej as its first step in green filed manufacturing base.

The company has planned a QIP of Rs 200 crore. The funds will be utilized to set up the manufacturing base for future growth. During the first round, the company will raise around Rs 100-120 crore.

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