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.

September 2016 quarter results

Sales for the quarter ended September 2016 slumped 30% to Rs 763.29 crore. OPM grew 40 basis points from 8.6% to 8.7% which saw OP fall 27% to Rs 66.41 crore.

Other income jumped 48% to Rs 24.88 crore. As interest cost rose 25% to Rs 6.88 crore and depreciation fell 4% to Rs 15.72 crore, PBT fell 21% to Rs 68.69 crore.

Provision for taxation was down 5% to Rs 24.66 crore. Finally PAT fell 27% to Rs 44.03 crore.

Six months results

Sales for the six months ended September 2016 fell 19% to Rs 1432.09 crore. OPM grew 50 basis points from 8.5% to 9.0% which saw OP fall 14% to Rs 128.55 crore.

Other income jumped 50% to Rs 45.46 crore. As interest cost rose 7% to Rs 13.89 crore and depreciation fell 5% to Rs 31.11 crore, PBT fell 4% to Rs 129.01 crore.

Provision for taxation was up 1% to Rs 42.50 crore. Finally PAT fell 7% to Rs 86.51 crore.

Present in various fields of engineering business

The company has good share in the domestic and overseas markets in Boilers. In recent years it had embarked on supplying turnkey power plants. In addition to the Boiler, it also supplies the Turbo set and balance of plant. This business has come of age. In some cases, it is also doing civil works. It continues to maintain its leading position in the range of Boilers that it operates in. With the commissioning of three Waste Heat Recovery Boilers, during the year under report, the company has successfully entered into the Waste Heat Recovery Boiler market. The Company has also secured its first order for Re-Heat type Circulating Fluidized Bed Combustion (CFBC) Boiler. This is likely to be commissioned early next year.

The Automobile Sector, the main user industry for Presses and Contract manufacturing, remained stagnant both in India and abroad during the year. However, the Company could retain its market share in the domestic market. Due to sustained efforts in developing the export market, particularly in North America where the company has its own representative, it could book substantial export orders for Presses and Contract manufacturing business. It also could secure good orders for Contract Manufacturing of sophisticated equipment to be supplied to the Indian Railways

The company has emerged as a leading Sugar Machinery and Sugar Boiler manufacturer both in domestic as well as international markets. It also received a number of orders for export and the Company is striving to become a world leader in this business in the next few years. In FY 2016 the company completed a project consisting of Sugar Plant of 3500 Tonnes Per Day capacity and 15 Mega Watt Co-generation Plant on a turnkey basis, including civil work, in a record time of little over 11 months. The Company has also entered into supplying of Sugar Refinery projects and two such projects are under execution. The Company continues to focus on Spares, Repairs & Maintenance and Operation & Management business for Boilers and Sugar Plants and has booked substantial orders.

Its Process Equipment Division books orders for large Pressure Vessels and Heat Exchangers. It has capacities in Yamunanagar as well as Dahej. The Division also books orders for critical equipment used in Fertilizer sector like Transfer Line, CO2 Absorber, LP/HP Flash Drum. The fall in crude prices caused a slowdown in the demand for Process Equipment for the Oil & Gas Sector. The diversification in the product range helped securing substantial orders from domestic as well as export markets for Fertilizer Plants. In order to offer faster delivery, the Company added equipments to de-bottleneck the plant. In FY 2016 the company successfully manufactured Low Pressure and Medium Pressure Decomposers for the Fertilizer Industry. In addition, the Company, for the first time, supplied Chain Type Heat Exchangers for a Fertilizer Plant and also Low Pressure Heaters for the Nuclear Power Corporation of India Limited.

American Society of Mechanical Engineers (ASME) has approved the Process Equipment Division of the company for manufacturer of equipments for Nuclear Plants and the Company has been awarded the 'N' and 'NPT' stamps.

The company continues to do well in the Tubing & Piping business. It increased its Piping manufacturing capacity substantially. In order to cater to the high end market including the Oil & Gas sectors, the Company installed a Cold Pipe Bending Machine to bend pipes up to 200 nb (nominal bore) x 25 mm thick. An Induction Bending Machine for bending 600 nb (nominal bore) x 60 mm thick pipes is expected to be installed in the second quarter of the current year.

The Iron Foundry, which manufactures specialized Ferrous and Gray Iron Castings, secured substantial orders and it has a record order book. The expansion scheme started last year was completed during the year on time. The Company started exports last year and this has shown high potential. More orders have been booked in FY 2016.

The company also manufactures heavier and more complex castings in the Steel Casting Unit of the company. This offers heavier and more complex castings to the market including P-91 and Duplex Stainless Steel Castings. P-91 is an alloy which is used for making castings to be used under very high temperature and pressure, such as Super critical grade steam turbine castings. Duplex grade of stainless steel is used for making castings for special Pumps in order to increase corrosive resistance. The steel Castings market remained depressed for most of FY 2016 however, in the latter part of the year some of the projects in Steam and Hydro sector took off. This resulted in the booking of good orders. The thrust on Pumps and Valve Castings enabled the Company to book good orders from this Sector.

Outlook

The Management continues to look for new technologies and new diversification areas so as to broaden its portfolio of products and also move into higher value adding businesses. Keeping in view the company is undertaking an exercise on growth strategy - to identify high potential new products, businesses, markets and partners. The company has engaged a leading consultancy firm to provide consultancy and develop strategies for achieving sustainable growth over the next 5 to 7 years. The work is in progress.

The outlook for FY17 appears to be stable, though there may be fluctuations in quarter to quarter performance.

Valuation

The share price trades at Rs 4600.