Analyst Meet / AGM - Analyst Meet
Wants to emerge as a niche player in offering solutions in drum closure and scaffoldings
In interaction with Mr S Saraf, MD
Key Highlights
Worldwide drum closures industry is about Rs 700 crore (Ex China) and company has market share of about 35%. The industry is small and has its own barriers in terms of product patents and technology. In terms of volumes it's a 150 M sets of drum industry, wherein each sets consists of 4 different parts to complete a drum closure and to be used by the user industry.
Globally the user industry broadly includes pharmaceuticals, oil & gas, chemicals, textiles, water effluent plants, metallurgy, F&B etc.
The company is currently operating at around 80% of installed capacity and capacity addition if any will be at capex of less than Rs 10 crore.
The user industry is growing by about 8% in volume terms and through better price realization and price increases, the segment will grow around 15% CAGR going forward.
The company is confident of maintaining Ebidta margin of around 28-30% in this segment.
The Scaffolding and foam division is predominately focused on exports. Unlike in India, where bamboo sheets are common in use in real estate, factories, industries, construction etc, globally only scaffoldings made from steel are used. This is a huge market and according to the management is difficult to quantify and company is a very small player with about Rs 225-250 crore of turnover. The division consists of more than 200-250 components and everything is manufactured in-house by the company.
The segment has an Ebidta margin of around 10% and as per the management this is sustainable.
The company exports its products to North America, South America, Gulf region, CIS and Latin America and some parts of EU.
The Yarn and garment division is a big worry for the company. The segment takes in about 1/3rd of total capital employed by the company and returns are very fluctuating. Management entered in this segment to diversify the business and though to take advantage of various subsidy by the government and to establish in post quota regime as a strong player. However nothing happened and infact the segment has reported losses many times.
Management has indicated that it will not increase its capacity of spindles in this segment which is around 61000 currently. It aims to sell off the segment if a right buyer emerges.
The company had invested about Rs 20 crore in commodity business of National Spot Exchange and the entire money stands lost. The promoters in their individual capacity also have invested about Rs 40 crore which also got lost.
The company has a wholly owned subsidiary called Technosoft Engineers which is into consultancy business of shale gas solutions. The subsidiary reported turnover of about Rs 75 crore in FY'14. Management is very optimistic about the business model of the subsidiary and is confident of growing more than 40% in FY'15.
Going forward, company wants to clear off from its past mistakes and loss making yarn and garment division. It wants to emerge as a niche player in offering solutions in drum closure and scaffoldings. It is also open for inorganic growth in these 2 segments.
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