20240429 Calibre April 2024 Investor Presentation.pdf
Tecpro Systems IPO Note
1. IPO Note| Capital Goods
September 23, 2010
Tecpro Systems SUBSCRIBE
Issue Opens: September 23, 2010
Power Packed Issue Closes: September 28, 2010
Incorporated in 1990, Tecpro Systems (Tecpro) was promoted by Ajay Kumar Issue Details
Bishnoi and Amul Gabrani, who have more than 25 years of experience in the Face Value: Rs10
material handling industry. The company designs, engineers, manufactures, sells, Present Eq. Paid up Capital: Rs44.2cr
commissions and services a range of systems and equipment for the core
Offer Size: 75.5 lac Shares
infrastructure related sectors like power, steel, cement and other industries.
Leveraging its capabilities in coal and ash handling, the company has also taken Post Eq. Paid up Capital: Rs50.4cr
up turnkey BoP contracts in the thermal power generation sector. Issue size (amount)*: Rs257cr-Rs268cr
Rationale for our Subscribe view Price Band: Rs340-Rs355
Promoters holding Pre-Issue: 90.0%
Established track record of project execution: Since commencement of operations
in 2001, Tecpro has successfully executed over 694 material handling projects Promoters holding Post-Issue: 52.6%
Note:*at Lower and Upper price band respectively
across core sectors. In the power sector, Tecpro provides turnkey material
handling solutions in several thermal power projects aggregating 10,800MW of
installed capacity. Its project execution capabilities have enabled the company to Book Building
establish long-term relationships with its clients and receive repeat orders.
QIBs At least 60%
Foray into Balance of Plant (BoP) contracts Non-Institutional At least 10%
Leveraging on its project management track record in both material and ash Retail At least 30%
handling solutions, Tecpro recently began undertaking BoP contracts. Tecpro
received its first BoP order of Rs993cr in August 2009 from CSPGCL for the Post Issue Shareholding Pattern
1x500MW Korba West Thermal Power Project (Extension Stage -III).
Promoters Group 52.60%
Robust order book provides revenue visibility: The company’s order intake has MF/Banks/Indian
FIs/FIIs/Public & Others 47.40%
consistently grown at a significant pace on sustained investments in the cement,
steel and power sectors. The company’s consolidated order book, as at July 31,
2010, stood at Rs2,311cr (1.6x FY2010 sales) as compared to Rs2,014cr as at
March 31, 2010, Rs1,253cr as at March 31, 2009 and Rs965cr as at March 31,
2008. The consistent growth in order book bears testimony to the company’s
performance track record and ability to successfully market its services to existing
and new clients.
Valuation: At the upper price band, Tecpro is projected to trade at a P/E and
EV/EBDITA of 16.5x and 8.3x its FY2010 earnings, respectively. When compared
with its immediate competitors, viz., Mcnally Bharat and TRF, the scrip is available
at a discount of ~10-15% on FY2010 earnings. In addition, over the past five
years the company has grown at a scorching pace along with successfully
John Perinchery
entering the BoP-EPC segment. As and when Tecpro begins to accumulate and
+91 22 4040 3800 Ext: 347
execute larger size BoP projects going ahead, it will be able to command
john.perinchery@angeltrade.com
premium valuations on superior growth and profitability margins. The successful
execution of few BoP projects over the next couple of years may also result in Hemang Thaker
Tecpro exploring the feasibility of taking up complete EPC for power plants (ie +91 22 4040 3800 Ext: 342
BTG + BoP), which would place it in league with BGR Energy. We recommend a hemang.thaker@angeltrade.com
Subscribe view on the IPO.
Please refer to important disclosures at the end of this report 1
2. Tecpro Systems | IPO Note
Company Background
Tecpro incorporated in 1990, was promoted by Ajay Kumar Bishnoi and Amul
Gabrani, who have more than 25 years of experience in the material handling
industry. Commencing operations in 2001, Tecpro executed 1,042 material
handling orders up to March 31, 2010 and currently has 269 material handling
orders under execution. The company designs, engineers, manufactures, sells,
commissions and services a range of systems and equipment for the core
infrastructure related sectors like power, steel, cement and other industries. In
order to expand its scope of services, Tecpro integrated its ash handling business
of Tecpro Ashtech (TAL), previously known as Mahindra Ashtech, with its existing
material handling operations. Over the years, Tecpro has developed in-house
capabilities for providing comprehensive solutions in material and ash handling
systems.
With a vision to build an integrated business serving the power sector, the
company has expanded into various complimentary businesses across different
segments of the power sector. As per CEA records, Tecpro received the highest
number of orders for coal handling plants during the Eleventh Five-Year Plan
(2007-2012). The company also forayed into the EPC segment for thermal power
projects in 2007, in which it managed the erection and commissioning of the
boiler, turbine and generator (BTG) packages along with undertaking the
engineering, design, supply and commissioning of other equipment and services in
an EPC contract. Leveraging its capabilities in coal and ash handling, the
company has also taken up turnkey BoP contracts in the thermal power generation
sector. The business undertaken by the company broadly comprises four segments
viz. material handling solutions, ash handling solutions, BOP/EPC contacts and
other businesses.
Exhibit 1: Business profile
Ash Handling solutions BOP/EPC contracts Other businesses
(through subsidiaries
)
• Manufacture and sale of • Manufacture and sale of • Undertake BoP • Supply of air pollution
material handling ash handling equipment contracts for thermal control equipment
equipment • Undertake turnkey ash power projects • Turnkey solutions
• Undertake turnkey handling contracts • Undertake EPC contracts for waste processing
material handling contracts • Focus on infrastructure for small thermal power and biomass power
• Focus on infrastructure sector: power, steel and projects generation
sector: power, steel and cement
cement
Source: Company, RHP
September 23, 2010 2
3. Tecpro Systems | IPO Note
Product range
Tecpro manufactures various products catering to a wide-range of material
handling applications at its four facilities located at Bawal, Haryana and Bhiwadi,
Rajasthan.
Exhibit 2: Plant location and products
Location Type of equipment manufactured
Bawal, Haryana Stackers
Reclaimers
Crushers
Screens
Feeders
Fabricated structures
Bhiwadi, Rajasthan (Unit I) Pulleys
Idlers
Rollers
Structures
Feeders
Screens
Conveyor systems
Conveyor components
Crushers
Screen parts
Bhiwadi, Rajasthan (Unit II) Ash handling equipment
Bhiwadi, Rajasthan (Unit III) Casting unit for both material handling
and ash handling equipment
Source: Company RHP
September 23, 2010 3
4. Tecpro Systems | IPO Note
IPO details
Tecpro is accessing the capital market with an IPO of 75.5 lakh equity shares of
Rs10 each in the price band of Rs340–355/share. The IPO comprises fresh issue of
up to 62.5 lakh equity shares and an offer for sale of up to 13 lakh equity shares
by Metmin Investments Holdings. The IPO opens on September 23, 2010 and
closes on September 28, 2010. The issue proceeds would be utilised to fund
working capital requirements and general corporate purposes.
Exhibit 3: Shareholding pattern
Pre Issue Post issue
No of Equity shares % of equity shares No of Equity shares % equity shares
Promoters:
- Ajay Kumar Bishnoi 9,019,842 20.4 9,019,842 17.9
- Amul Gabrani 9,319,342 21.1 9,319,342 18.5
Sub-Total 18,339,184 41.5 18,339,184 36.3
Promoter Group : 8,206,656 18.6 8,206,656 16.3
0.0 0.0
Promoters and Promoter group 26,545,840 60.0 26,545,840 52.6
Non Promoters
Avigo Venture Investments 6,819,153 15.4 6,819,153 13.5
Metmin Investments Holdings 5,594,881 12.7 4,294,881 8.5
Avigo Trustee Company Private Limited A/c
705,557 1.6 705,557 1.4
The Avigo SME Fund
Bond Street Custodians in its capacity
as custodians for Macquarie Asia Pacific Co- 1,650,000 3.7 1,650,000 3.3
Investment Fund LP
Achal Ghai 1,302,200 2.9 1,302,200 2.6
Others 1,606,160 3.6 1,606,160 3.2
Public (pursuant to the Issue) - - 7,550,000 15.0
Total Non-Promoters 17,677,951 40.0 23,927,951 47.4
Total 44,223,791 100.0 50,473,791 100.0
Source: Company RHP. *Offer for sale of 13,00,000 shares by Metmin Investments
Exhibit 4: Objects of the issue
Particulars Estimated net proceeds (Rs cr)
Fund the working requirements 200
Fund expenditure for general corporate purposes* 13-22
Total 213-222
Source: Company RHP; Note: *At lower and upper price band respectively
September 23, 2010 4
5. Tecpro Systems | IPO Note
Industry Overview
Infrastructure spending In India is set to grow significantly as targets for the
Eleventh Five-Year Plan have been revised from 4.6% to 7.5% of GDP, an increase
of over 140% over the Tenth Plan. In tandem with the projected investment in
infrastructure, the related industries in power, steel, coal and cement are also
expected to witness significant growth. This would require substantial expansion in
the supply of key raw materials for the proposed investment in the infrastructure
sector. Accordingly, several projects have been proposed by both the private and
public sector companies for creation of new capacity and expansion of existing
plants. The process of commissioning of these projects is expected to generate
additional demand for machinery. The continued thrust on infrastructure creation
and planned funding of projects are expected to ensure a steady stream of order
inflows for the capital goods companies.
Material handling systems includes bulk, powder and other solids handling systems
for coal, ash and other raw materials and finished products such as cement. The
material handling equipment (MHE) includes belt conveying systems, pneumatic
conveying systems, crushing and screening equipment, coal/ore/ash handling
plants and associated equipment such as stackers, reclaimers, ship
loaders/unloaders, wagon tipplers and feeders, which cater to the needs of the
core industries such as power, cement, port, mining, fertilisers and iron & steel.
The industry can be broadly classified into material handling systems (bulk
material handling and unit load handling) and ash handling systems.
Bulk material handling
The bulk material handling systems are used in manufacturing industries for
handling raw materials for the manufacturing process. Material handling facilities
transport material from one location (source) to another location (destination).
Providing storage and inventory control and to an extent material
processing/blending is a part of a material handling systems as well. Material
processing/blending refers to the process of converting raw material from a crude
form to a form which can be used in production.
Exhibit 5: Bulk material handling - Typical applications
Industry Raw materials
Coal, lignite, biomass material like bagasse, rice husk, mustard husk,
Power
wood chips and ash (bottom ash and fly ash) from boiler
Steel Iron ore, dolomite, feldspar, limestone, coal, coke
Cement Limestone, coal, gypsum, lignite
Paper Bagasse, wood chips, coal, lignite
Sugar, Coal, lignite, biomass material like bagasse, rice husk, mustard husk,
cogeneration wood chips
Other sector
For loading or unloading of cereals, ores and minerals
such as port
Source: Company RHP
September 23, 2010 5
6. Tecpro Systems | IPO Note
Unit load handling
Any material that has a defined physical shape and which has to be handled in a
particular way so that it maintains its integrity is referred to as the unit load. The
equipment used in unit load handling includes cranes, hoists, conveyors, forklifts,
trucks. In the same industries as mentioned above unit load systems are used for
handling finished products.
Exhibit 6: Unit load handling - Typical applications
Industry Finished Products
Steel Rolled products, flat products
Cement Cement Bags,
Paper Paper bales, rolls, cartons
Sugar concentration Sugar bags
Other sectors Cartons
Source: Company RHP
Ash handling
Ash handling in a power, cement or steel plant is extremely critical considering the
environmental impact of any ash spillage during the storage and disposal of liquid
or dry ash. The ash handling system utilizes different technologies including
pneumatic conveying, slurry and pumping of ash in liquid state or solid conveying
through conveyors.
Balance of Plant (BoP)
The BoP package includes all the components required to set up a power plant
other than the BTG components. The BoP contract typically includes packages for
ash handling plant, coal handling plant, water treatment/ de-mineralised water
plant, cooling towers, chimneys, civil construction, switchyard and electrical
package. Among these, ash and coal handling continue to be critical areas which
have suffered from the lack of adequate number of players. As per CEA
information, there are limited number of companies in India who qualify for
supplying BoP packages, which is resulting in delay in supplies and project
execution. The number of vendors available for providing key BoP packages as of
August 2009 is as follows:
Exhibit 7: Tentative number of BoP vendors
Name of BOP No. of vendors
Coal handling plant 8
Ash handling plant 9
De-mineralised water plant 5
Cooling towers 5
Chimneys 4
Water treatment plant 5
Fuel oil systems 4
Source: Company RHP
September 23, 2010 6
7. Tecpro Systems | IPO Note
As on June 30, 2010 the following orders for BoP packages had been placed and
as per the estimated capacity addition in the Eleventh Plan, around 18 orders for
BoP packages were yet to be placed.
Exhibit 8: Orders placed for Eleventh Plan period
BoPs required for Projects under Order already Balance order
Name of BoP
construction placed to be placed
Coal handling plant 51 49 2
Ash handling plant 52 50 2
De-mineralised
52 48 4
Water plant
Cooling towers 99 97 2
Chimneys 75 74 1
Fuel oil system 52 49 3
Pre treatment plant 55 51 4
Total 436 418 18
Source: Company RHP
Major orders placed with the various entities for coal handling plants for thermal
power plants as of August 2009 are given below.
Exhibit 9: Coal handling plant - Major orders placed
Company No of orders
Tecpro Systems 11
L &T 7
Elecon Engineering Co. 6
TRF 3
ThyssenKrupp Industries India 3
Others* 27
Total 57
Source: Company RHP, Note: *Includes single EPC contracts for BoPs, which may have further
awarded sub-contracts to the above vendors
Major orders placed with various entities for ash handling plants for thermal power
plants as of August 2009 are given below.
Exhibit 10: Ash handling plant - Major orders placed
Company No. of orders
The Indure Pvt. Ltd 12
Mecawber Beekay Pvt. Ltd. 11
Tecpro Systems* 9
D C Industrial Plant Services Pvt. Ltd. 5
McNally Bharat Engineering Co. 3
Others** 19
Total 59
Source: Company RHP, Note:* Includes orders awarded to Tecpro Ashtech previously known as
Mahindra Ashtech, now merged with Tecpro Systems. **Includes single EPC contracts which may
have further awarded sub-contracts to the above vendors
September 23, 2010 7
8. Tecpro Systems | IPO Note
As per CEA estimates, ~ 74,000MW and 2,500MW of coal-based power plants
and lignite-based power plants are proposed to be added in the Twelfth Plan.
Accordingly, the tentative estimated requirements for BoP during the Twelfth Plan
are given below.
Exhibit 11: Estimated requirements of BOP for Twelfth Plan
System BoP Requirements
Coal handling plant 148
Ash handling plant 148
De-mineralised water plant 211
Cooling towers 218
Chimneys 77
Fuel oil system 148
Pre treatment plant 160
Source: Company RHP
The CEA and Ministry of Power have, therefore, recommended that more vendors
for BoP are required to be developed. In order to address this issue, the
government recently initiated steps to empanel new vendors of BoP equipment like
ash handling plant, coal handling plant, water treatment plant including DM plants
and expand their geographical spread to overcome constraints related to timely
completion of BoP. On the request of the utilities, the pre-qualification
requirements for the BoP suppliers were reviewed by the CEA and revised to allow
new entrepreneurs to qualify.
September 23, 2010 8
9. Tecpro Systems | IPO Note
Investment Rationale
Established track record of project execution: Since commencement of
operations in 2001, Tecpro has successfully executed over 694 material handling
projects in diverse sectors. As of July 31, 2010, the company had installed up to
371kms of conveyor belts and 31kms of vertical lifts in its material handling
business. In the power sector, the company provides turnkey material handling
solutions to several thermal power projects aggregating up to 10,800MW of
installed capacity. The acquisition of TAL (engaged in the business of ash handling
systems for over 40 years) has enabled Tecpro to create a single entity, which
would carry on the businesses of material and ash handling - that is integrated
and complimentary in nature.
The company’s project execution capabilities have enabled it to establish long-term
relationships with its clients and receive repeat orders. As of July 31, 2010, the
company received repeat orders from 141 clients for 1,222 orders for material
handling and 78 repeat orders from 21 customers for ash handling thereby
exhibiting superior execution track record and relationship with clients.
Strong in-house design and manufacturing capabilities: Tecpro has four
manufacturing facilities out of which three are located at Bhiwadi, Rajasthan and
one at Bawal, Haryana. The Bawal plant manufacture stackers, reclaimers,
crushers, screens, feeders and fabricated structure. The plants at Bhiwadi,
Rajasthan have facilities manufacturing pulleys, idler, rollers, structures, feeders,
screens, conveyor systems, conveyor components, crushers and screen parts. The
casting unit at Bhiwadi, Rajasthan services both the material and ash handling
equipment. Over the years, the company has also developed extensive in-house
mechanical, electrical, civil, design and engineering capabilities with an
established track record of executing turnkey projects in the power, steel and
cements industries.
The company has a dedicated in-house design and engineering team comprising
287 engineers and experienced project management team, which gives the
company control of the entire process, from conceptualisation to commissioning of
a given project, which helps the company in providing customised solutions as per
clients’ specific requirements. The design, engineering and marketing teams are
spread across offices at Gurgaon, Kolkata, Mumbai, Secunderabad, Ahmedabad,
Chennai, Bangalore and Pune, which provides greater flexibility and efficiency.
Technical collaborations and alliances: Tecpro has fostered technical
collaborations and license agreements with international companies including FAM
Magdeburger Forderanlagen und Baumaschinen GmbH, Germany,
Maschinenfabrik Liezen und Giesserei GmbH, Austria, PEYTEC Material Handling
GmbH, Austria and Won Duck Industrial Machinery Company Limited, Korea.
These collaborations strengthen Tecpro’s technical credentials and facilitate it to
deliver superior solutions to the customers. The foreign collaborations and
alliances provide access to advanced technologies and expertise developed by
these companies, which along with Tecpro’s project management, engineering
and construction capabilities enables the company to provide effective solutions for
its clients.
September 23, 2010 9
10. Tecpro Systems | IPO Note
Exhibit 12: Technical collaborations
Collaborator Description of the collaboration
Licence for manufacturing, using, selling and exploiting certain products of Siebtechnik
Siebtechnik GmbH
including the complete range of vibrating screens
Licence for sale and manufacturing of various types of crushers including jaw crusher,
Maschinenfabrik Liezen Und Giesserei GmbH^
impact crusher, hammer mill, roller crusher, compound crusher and mobile crushin.
Licence for manufacturing ‘Gladiator’ flip-flow screening machines and all other
PEYTEC Material Handling GmbH
conventional screens
Hein, Lehmann, Trenn-und Fordertechnik GmbH License for manufacturing ‘Liwell’ flip-flow screens
MVW Lechtenberg Projektentwicklungs und Cooperation agreement for the development of secondary fuel production and biomass
Beteiligungsgesellschaft GmbH handling projects in India
Won Duck Industrial Machinery Company Limited Licence for sale of cone crushers and manufacture of single toggle jaw crushers
FAM Magdeburger Forderanlagen und Baumaschinen Licence to sell, design, engineer, manufacture, transport, erect, commission and service
GmbH certain crushers, roller screens and grinding
Licence agreement for sale and manufacturing of various types of stacker, reclaimers,
Krusnohorske Strojirny Komorany
paddle feeders and twin rotor sizers
Promotion of high concentration slurry disposal systems where bottom ash and flyash
GEA EGI Contracting/Engineering Company Limited
are to be disposed together
Xiamen Longking Bulk Materials, Science and Collaboration for dry bottom ash handling system, pneumatic conveying fly ash
Engineering Company Limited handling system and coal mill rejects handling system
Collaboration for supply of cast basalt pipe and pipe fittings to be used in the
Greenbank Terotech Limited^^^
conveying of abrasive materials such as ash and slurry for core sector industries
Others:
Formation of a joint venture for manufacture of critical equipment of air and gas
Trema Verfahrenstechnik GmbH
pollution control systems
Source: Company RHP
September 23, 2010 10
11. Tecpro Systems | IPO Note
Robust order book provides revenue visibility: Order intake has consistently
grown at a significant pace on the back of sustained investments in the cement,
steel and power sectors. Consolidated order book as at July 31, 2010 was
Rs2,311cr (1.6x FY2010 sales), as compared to Rs2,014cr as at March 31, 2010,
Rs1,253cr as at March 31, 2009 and Rs965cr as at March 31, 2008. The
company was awarded additional contracts of Rs552cr in material handling and
Rs208cr in ash handling respectively, during the period between April 1, 2010 and
July 31, 2010. The consistent growth in order book bears testimony to the
company’s performance track record and ability to successfully market its services
to existing and new clients.
Exhibit 13: Order book as of July 31, 2010 (Rs2,312cr)
549
711
1052
BOP +EPC Material handling Ash Handling
Source: Company RHP
Forays into BoP-EPC: Leveraging on its established project management track
record in both material and ash handling solutions, Tecpro recently began
undertaking BoP contracts. Tecpro received its first BoP order for Rs993cr in
August 2009 from CSPGCL for the 1x500MW Korba West Thermal Power Project
(Extension Stage -III). Tecpro had won the above BoP order in consortium with
Gammon India (GIL) and VA Tech Wabag (VTWB). As a lead consortium member,
Tecpro would be executing the coal handling plant package and ash handling
plant package, while GIL is the contractor of the cooling tower package and VTWB
is the contractor of water system package. Out of the total contract value, 85% is to
be executed by Tecpro and the remaining 15% would be subcontracted to other
two consortium members.
September 23, 2010 11
12. Tecpro Systems | IPO Note
Business Strategy
Focus on BoP contracts in the power sector: Tecpro is expected to focus on the
opportunities available in the material and ash handling solutions as well as
undertake EPC and BoP contracts in the power sector. The company would be
developing its capabilities in the BoP segment by successfully executing BoP
projects in consortium and building a track record to bid for large BoP and EPC
contracts. Being the lead contractor for BoP projects, the company can deploy its
resources more efficiently and improve its operating margins. For certain large
value projects, the company also plans to form strategic alliances with the relevant
experienced and qualified sub-contractors.
Increase product offerings: To execute the turnkey projects including BoP and EPC
contracts for thermal power plants, Tecpro sources certain MHE from third parties
or bids with a partner who has the capability to supply such packages. The
company intends to increase its product range of MHE like stackers, reclaimers of
different sizes and gradually reduce its dependence on external manufacturers and
suppliers. This strategy would enable the company to enhance its capability to
execute projects in a timely manner and improve profitability.
Acquire expertise through technical tie-ups and inorganic growth: Tecpro currently
executes the material and ash handling systems in-house and sources the
remaining packages of the BoP from third parties. Going forward, it intends to
move towards providing more value-added engineering services and improve the
manufacturing and project execution capabilities. Tecpro proposes to manufacture
and commission water treatment plants and cooling towers in-house for its BoP
contracts. It also intends to foray into the supply and commissioning of coal
washeries and port handling operations. In order to acquire technical expertise in
manufacturing such water treatment plants, cooling towers or coal washeries, the
company may enter into technical collaborations or strategic tie-ups with
international companies with advanced manufacturing technologies or acquire any
existing companies with such technical expertise, which would also help it
consolidate its operations in the power infrastructure sector.
September 23, 2010 12
13. Tecpro Systems | IPO Note
Outlook and Valuation
Tecpro’s track record of project execution and its ability to report rapid growth in
revenues and profitability has been its hallmark in recent years. When compared
with peers, Tecpro’s profitability margins are the highest in the MHE industry.
Considering the cyclical nature of the MHE industry and its vulnerability to
economic slowdown, Tecpro has been able to comfortably sail through and
register growth in both good and bad times. As increasing investments get
committed to Indian infrastructure, we expect companies like Tecpro to benefit on
the back of rising requirements for material handling systems across various
industries that support infrastructure building. Currently, Tecpro provides coal and
ash handling solutions and outsources the remaining portion of the BoP packages
to other vendors. The long-term strategy would be to broaden its capability and
execute associated BoP packages, which would enable the company to
independently (without the need for consortium) place bids for turnkey BoP
projects.
At the upper price band, Tecpro is projected to trade at a P/E and EV/EBDITA of
16.5x and 8.3x its FY2010 earnings, respectively. When compared with its
immediate competitors, viz., Mcnally Bharat and TRF, the scrip is available at a
discount of ~10-15% on FY2010 earnings. In addition, over the past five years
the company has grown at a scorching pace along with successfully entering the
BoP-EPC segment. As and when Tecpro begins to accumulate and execute larger
size BoP projects going ahead, it will be able to command premium valuations on
superior growth and profitability margins. The successful execution of few BoP
projects over the next couple of years may also result in Tecpro exploring the
feasibility of taking up complete EPC for power plants (ie BTG + BoP), which would
place it in league with BGR Energy. We recommend a Subscribe view on the IPO.
Exhibit 14: Peer Valuation (FY2010)
Company CMP Market Sales EBIDTA Net Income EBDITA PAT P/E EV/EBIDTA EV/Sales
(Rs) Cap (Rs cr) (Rs cr) (Rs cr) (Rs cr) (%) (%) (x) (x) (x)
Mcnally Bharat 292 906 1,711 149 50 8.7 2.9 18.3 8.0 0.7
TRF 843 928 866 87 47 10.0 5.4 19.8 14.2 1.4
BGR Energy 769 5,543 3,073 345 201 11.2 6.6 27.4 11.0 1.2
Tecpro * 355 1,792 1,455 226 109 15.5 7.5 16.5 8.3 1.3
Source: Company, Angel Research; Note: * At the upper price band of Rs355/share
September 23, 2010 13
14. Tecpro Systems | IPO Note
Key Concerns
Slowdown in economic growth may impact business: Tecpro’s performance and
the growth of its business are necessarily dependent on the health of the overall
Indian economy. Any slowdown in the Indian economy may hamper the capital
expenditure plans of the core sector industries and could adversely affect the
company’s business.
Dependence on technical collaborations: Tecpro relies on technical collaborations
with leading international companies to facilitate its business operations. The
company currently has technical collaborations with companies such as FAM
Magdeburger, Forderanlagen und Baumaschinen GmbH, PEYTEC Material
Handling GmbH, Maschinenfabrik Liezen und Giesserei GmbH and Won Duck
Industrial Machinery Company Limited. Tecpro’s inability to renew its technical
collaborations or to enter into similar collaborations with other parties may
adversely affect business operations.
Inability to attract and retain key personnel could adversely impact operations: The
success of many MHE manufacturers largely depends on the continued services
and performance of the key management team and other key employees. The loss
of services of the senior management team or other key personnel could adversely
affect operations and financial condition.
September 23, 2010 14
15. Tecpro Systems | IPO Note
Profit & Loss statement (Consolidated)
Y/E March (Rs cr) FY2006 FY2007 FY2008 FY2009 FY2010
Net Sales 103 230 505 799 1455
Other operating income 0.0 0.0 0.0 0.0 0.0
Total operating income 102.9 230.0 504.7 799.3 1,454.9
(Inc) dec in stock (3.5) (7.1) (0.8) (26.9) (9.3)
Raw Materials 65.7 159.2 332.1 481.3 619.6
contract cost 0.0 0.0 14.7 111.8 417.4
Other cost of goods sold 8.6 10.2 23.3 40.3 58.6
Employee cost 5.6 11.7 23.8 40.9 65.2
Selling and Administrative
9.1 19.4 42.5 55.3 78.0
expenses
Total Expenditure 85.5 193.3 435.7 702.7 1229.4
EBITDA 17.4 36.6 69.0 96.6 225.6
(% of Net Sales) 16.9 15.9 13.7 12.1 15.5
Depreciation& Amortisation 0.7 1.4 2.6 3.4 7.4
EBIT 16.7 35.2 66.4 93.2 218.1
(% of Net Sales) 16.2 15.3 13.2 11.7 15.0
Interest & other Charges 1.7 3.5 5.0 14.4 71.4
Other Income 0.4 1 4 12 21
Recurring PBT 15.4 33.1 65.8 90.8 167.4
Extraordinary Expense/(Inc.) - - - - -
PBT (reported) 15.4 33.1 65.8 90.8 167.4
Tax 6.3 12.8 24.9 35.5 58.9
PAT (reported) 9.1 20.3 40.9 55.4 108.5
Adjustments 0.40 (0.14) (0.10) (0.00) 0.43
Adjusted PAT 9.5 20.1 40.8 55.4 108.9
(% of Net Sales) 9.2 8.8 8.1 6.9 7.5
Basic EPS 6.2 8.7 15.8 20.2 25.0
Diluted EPS 5.2 8.2 15.7 20.0 25.0
% change - 56.9 91.5 26.7 25.2
September 23, 2010 15
17. Tecpro Systems | IPO Note
Cash Flows (Consolidated)
Y/E March (Rs cr) FY2006 FY2007 FY2008 FY2009 FY2010
A) Cash flow from operating activities
Profit/ (Loss) before tax 15.3 33.1 65.8 90.8 167.4
Adjustments 2.4 4.4 7.9 17.9 70.5
Operating (loss)/ profit before
17.7 37.5 73.7 108.7 237.9
changes in working capital
Adjustments for (Inc)/dec working capital
Sundry debtors (19.8) (61.3) (138.1) (214.0) (357.4)
Loans and advances (4.0) 0.4 (17.2) 0.0 (36.0)
Inventories (7.2) (13.8) (9.6) (46.0) (22.7)
Other current assets - - (8.6) (22.2) (160.8)
Current liabilities and provisions 14.9 55.6 128.3 216.3 215.6
Net changes in working capital 1.7 18.5 28.5 42.9 (123.4)
Direct taxes paid (3.8) (5.8) (15.0) (29.6) (62.6)
Cash generated from/
(2.1) 12.8 13.5 13.2 (186.0)
(used in) operations
B) Cash flow from investing activities - - - - -
Sale of fixed assets 1.5 0.1 0.0 0.0 0.1
Share application money
(0.1) - - - -
pending allotment
Purchase of business of
- (12.7) (0.2) - -
subsidiaries (net of cash acquired)
Purchase of fixed and
(7.7) (10.4) (25.4) (42.5) (43.6)
intangible assets
Purchase of investments (0.1) (0.0) - - (3.0)
Advance for share purchase - - - - (3.5)
Dividend received 0.0 0.0 0.0 0.0 0.0
Interest received 0.2 0.6 2.1 5.7 13.6
Net cash (used in) /generated
(6.2) (22.4) (23.5) (36.8) (36.4)
from investing activities
C) Cash flow from financing activities - - - - -
Issue of equity share capital 1.2 0.5 1.4 1.0 9.0
Issue of preference share capital 15.0 - - 20.0 -
Receipt of share application money (0.02) 2.4 0.0 - -
Securities premium received - 9.6 31.9 23.0 -
Borrowings 12.7 30.0 15.9 100.8 410.4
Repayments (5.9) (14.8) (7.8) (29.9) (58.2)
Interest received on loan given to other
- - 0.1 - -
company
Preference dividend paid - - - - (0.0)
Interim dividend paid (2.0) - (6.3) (18.7) (13.8)
Dividend taxes paid (0.3) - (1.1) (3.2) (2.4)
Share issue expenses - - (2.3) - (0.4)
Financial expenses paid (1.6) (3.5) (5.0) (14.4) (70.8)
Net cash (used in)/ generated from
19.1 24.3 26.9 78.7 273.8
financing activities
Net increase/(decrease) in cash and cash
10.7 14.7 17.0 55.2 51.4
equivalents
Cash and cash equivalents at the
3.2 13.9 28.6 45.5 100.7
beginning of the year
Cash and cash equivalents acquired on
- - - 0.0 30.4
amalgamation
Cash and cash equivalents at the end of
13.9 28.6 45.6 100.7 182.5
the year
September 23, 2010 17
18. Tecpro Systems | IPO Note
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September 23, 2010 18
19. Tecpro Systems | IPO Note
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Research Team
Fundamental:
Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angeltrade.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angeltrade.com
Vaishali Jajoo Automobile vaishali.jajoo@angeltrade.com
Shailesh Kanani Infrastructure, Real Estate shailesh.kanani@angeltrade.com
Anand Shah FMCG, Media anand.shah@angeltrade.com
Deepak Pareek Oil & Gas deepak.pareek@angeltrade.com
Sushant Dalmia Pharmaceutical sushant.dalmia@angeltrade.com
Rupesh Sankhe Cement, Power rupeshd.sankhe@angeltrade.com
Param Desai Real Estate, Logistics, Shipping paramv.desai@angeltrade.com
Sageraj Bariya Fertiliser, Mid-cap sageraj.bariya@angeltrade.com
Viraj Nadkarni Retail, Hotels, Mid-cap virajm.nadkarni@angeltrade.com
Paresh Jain Metals & Mining pareshn.jain@angeltrade.com
Amit Rane Banking amitn.rane@angeltrade.com
John Perinchery Capital Goods john.perinchery@angeltrade.com
Srishti Anand IT, Telecom srishti.anand@angeltrade.com
Jai Sharda Mid-cap jai.sharda@angeltrade.com
Sharan Lillaney Mid-cap sharanb.lillaney@angeltrade.com
Amit Vora Research Associate (Oil & Gas) amit.vora@angeltrade.com
V Srinivasan Research Associate (Cement, Power) v.srinivasan@angeltrade.com
Mihir Salot Research Associate (Logistics, Shipping) mihirr.salot@angeltrade.com
Chitrangda Kapur Research Associate (FMCG, Media) chitrangdar.kapur@angeltrade.com
Vibha Salvi Research Associate (IT, Telecom) vibhas.salvi@angeltrade.com
Pooja Jain Research Associate (Metals & Mining) pooja.j@angeltrade.com
Yaresh Kothari Research Associate (Automobile) yareshb.kothari@angeltrade.com
Shrinivas Bhutda Research Associate (Banking) shrinivas.bhutda@angeltrade.com
Sreekanth P.V.S Research Associate (FMCG, Media) sreekanth.s@angeltrade.com
Hemang Thaker Research Associate (Capital Goods) hemang.thaker@angeltrade.com
Nitin Arora Research Associate (Infra, Real Estate) nitin.arora@angeltrade.com
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Mileen Vasudeo Technical Analyst vasudeo.kamalakant@angeltrade.com
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Abhimanyu Sofat AVP - Institutional Sales abhimanyu.sofat@angeltrade.com
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September 23, 2010 19
