Jan 21 -01

Indo Asian Fusegear Ltd - 165.00 Rs

From a modest beginning in 1958 by Mr. V.P. Mahendru, Indo Asian Fusegear Ltd (IAFL) has today, grown into a multi-product, multi-location company specializing in manufacturing and marketing a wide range of high-tech electrical products used for distribution, protection, control and conservation of electrical energy. Infact it enjoys the status of being the first company in India - to introduce miniature circuit board in homes, to produce residual current-operated circuit breakers with internationally recognized CB certification, to manufacture energy efficient compact fluorescent lamps and the only one to produce ROHS (Restriction of Hazardous Substances) compliant i.e. less mercury CFLs. Broadly, company deals in two segments - switchgear and lighting of which former contributes around 80% of the revenues and the balance 20% comes from lighting segment. Under switchgear division, it produces hundred of products such as MCB, MCCB, RCB, distribution boards, SPD, HRC fuses, cubicle switch, onload changeover, rewireble switches, feeder pillars, modular switches, wiring accessories etc. It also manufactures special application products like time switches, contactors, MPCB, relays, plug & socket etc. Under lighting category it deals in CFL, FTL (Fluorescent Tubular Lamps), domestic luminaires and commercial luminaires. Notably, IAFL is the largest manufacturer of CFLs and MCB’s in India. Besides, it is among the largest exporter of circuit protection equipments and CFLs to European countries including UK, Germany etc and Middle East, South Africa, Srilanka and Australia. As on today, exports contribute round about 20% of total sales.

IAFL boast of having eight plants across Punjab, Haryana, UP, HP and Uttrakhand out of which five are dedicated for switchgear production, two for lighting business and one for wires & cable. Importantly, its new CFL & switchgear plant in tax free zone of Haridwar with a capacity of 10 & 15 million units respectively has started production recently only. With commencement of these facilities company has enhanced its production capacities substantially and expects to grow at a CAGR of 75~80% for next 2~3 years. It has entered into various technical and strategic tie-ups with international majors like Indo Kopp, Nordex Lighting, Theben, Woertz, Lovata electric etc. Notably, its brands like “Indo Asian”, “Indo Kopp” “Ecolite” & “Hausmann” are associated as quality products and are very well accepted not only in domestic market but globally as well. To compliment this, company has a wide geographical market coverage including 30 offices across India, 850+ distributors, 35000+ electrical retail outlets and overseas offices in Dubai & Germany. To tap the nearby countries, company has made some arrangement with the local players to distribute its products in Nepal and Srilanka. On the other hand, earlier it made a tie up with Brilliant AG-Germany for marketing their complete range of modern style indoor and outdoor lighting equipments, fittings & accessories in India.

As a part of diversification, IAFL is venturing into cables & wires manufacturing business and has recently promoted a subsidiary to implement Rs 100 cr project in phases. Further it has set up another wholly owned subsidiary to undertake power distribution projects on behalf of state electricity boards, corporations and utilities on franchise basis and has already secured two contracts for a period of three years aggregating to Rs 50cr from the electricity board of Madhya Pradesh for distributing power in Jabalpur. Meanwhile, company has set up a JV (51:49) with Simon-Europe to manufacture and market high quality wiring accessories, building automation and intelligent switching systems, especially for industrial and commercial use. This will be one of its kind plants in India which is being set up in Uttrakhand at an initial project cost of Rs. 30 cr and is estimated to commence operation by mid 2008. Moreover it is also putting up a facility in Saudi Arabia - in joint venture with Saudi National Glass, for manufacturing of CFLs and high intensity discharge lamps (HID Lamps), with an investment of Rs 20 cr.

In short, to leverage the burgeoning opportunities in the Indian and global power industry, IAFL has aggressively ramped up its production capacity and is diversifying into emerging business opportunities like home & building automation products, power distribution projects & wires/cable business. It is at the inflexion point and will report bumper nos for the FY09 on back of increased capacity and improved capacity utilization. Meanwhile for FY08, on a conservative basis it is estimated to clock a turnover of more than Rs 300 cr and PAT of Rs 20 cr i.e. EPS of Rs 14 on current equity of 14.60 cr. But it has the potential to post Rs 24 EPS for FY09. However company is looking to raise nearly Rs 200 cr thru equity route to fund its future growth plans which may dilute the equity substantially going forward. Despite this, investors are advised to buy at current levels for a price target of Rs 250 (50% appreciation) in 9~12 months.


Lloyd Electric & Engineering Ltd - 178.00 Rs


Lloyd Electric and Engineering Ltd (LEEL) was incorporated in 1988 primarily as a backward integrated unit of Fedders Lloyd Corp, the leading group company to manufacture coils for air conditioners. Hence it specializes in the custom design and manufacture of heating and cooling coils including 'U' bend and return bend tubes for heat exchanger coils, system tubing, header line etc and sheet metal items for air-conditioning and refrigeration applications. Over the year it has emerged as India’s largest manufacturer of evaporator and condenser (E&C) coils with around 60% market share. E&C coils are critical components in AC manufacturing next only to the compressor and account for approximately 20% of the cost of manufacture. Offlate, company has got itself forward integrated into lucrative business of contract manufacturing of window / split air conditioners for various multi national companies in India. Thus company is an OEM supplier to almost all AC manufacturers in India and its clientele includes Samsung, Electrolux, Carrier, Haier, Voltas, Blue Star, LG, Hitachi, Whirlpool, Diakin to name a few. Importantly, LEEL has also ventured into manufacturing of roof mounted packaged unit i.e. packaged AC for railway coaches on turnkey basis which includes designing, manufacturing, supplying, installation and maintenance. Hence it has set up service station all around India like at New Delhi, Mumbai, Chennai, Bangalore, Hyderabad, Lucknow, Jaipur, Guwahati and Culcutta specially for maintaining the AC package units installed on the railway coaches. Presently, LEEL derives roughly 60% revenue from coils, 30% revenue from contract manufacturing of AC’s and balance 10% from railways.

Earlier, LEEL was operating thru two manufacturing facilities located at Bhiwadi in Rajasthan and Kala-Amb in Himachal Pradesh, but from last fiscal it commenced operation at its new plant in Dehradun (Uttaranchal) with an installed capacity of 2,00,000 coils & 2,00,000 airconditioners. Thus its total manufacturing capacity stands enhanced to 12,25,000 coils whereas assembling capacity got doubled to more than 4,00,000 ACs. The biggest positive for the company is that it enjoys a 10 year excise duty and income tax exemption at its Kala-Amb and Dehradun facilities and would be paying sales tax at a concessional rate. To expand its product range further, company is now diversifying to produce roll bond and frost free coils for refrigerators and has tied up with a Korean company, Hanyung Alcobis for the same. With this it would become the first manufacturer in India, as the entire requirements of these coils are generally met thru imports and that too mainly from Korea. Hence to maintain its future growth LEEL is in the process of setting up a Greenfield plant near JNTP port on Mumbai-Pune highway with an initial capacity to produce 2,00,000 frost-free refrigeration coils, 4,00,000 AC coil and 2,00,000 units of air conditioners. It has already acquired 25 acres land and is looking to start the plant by mid 2009. Meanwhile, LEEL has signed a MoU with Air International Transit Pty Limited, an Australia-based company for designing, manufacturing and supplying of AC package units to metro rail in India. Accordingly, company is actively pursuing Delhi Metro Rail Corporation (DMRC) Phase 1 extension and Phase 2, for the metro coach air conditioners and expects to get substantial orders in future. Besides company is also exploring the possibilities of export of coils and components for the new metros coming overseas.

To fund its expansion plan company been regularly raising capital thru equity route may it be GDR or preferential allotment of shares/warrants. After raising Rs 50 cr thru allotment of 40 lakh shares @ 125 Rs earlier, company has recently allotted 50 lakh warrants to be converted @ Rs 225 per share thereby making arrangement to get fund to the tune of Rs 100 cr in future. Further it is contemplating to raise Rs 200 cr thru QIB route which combine may lead to 40% equity dilution. However, in a continuing climate of economic buoyancy, the domestic market for Heating, Ventilation, Air-conditioning and Refrigeration industry (HVACR) is growing at a healthy pace. Secondly, with the increase in disposable income, change in lifestyle and easy availability of finance at low rate of interest has led to the sharp growth in air conditioner segment. Fundamentally, company is doing exceedingly well and has recorded 40% growth in topline as well as bottomline for H1FY08. In view of that it is expected to end FY08 with sales of Rs 650 cr and NP of Rs 58 cr i.e. EPS of Rs 19 on current equity of Rs 31 cr. However, frequent equity dilution may cap the upside potential of the share price. Still investors are recommended to buy at current levels with a price target of Rs 275 (60% appreciation) in 15 months.