Indsil Hydro Power & Manganese Ltd: Resilient chrome
(BSE Code: 522165) (CMP: Rs.75.65) (FV: Rs.10)
Coimbatore based Indsil Hydro Power & Manganese Ltd (Indsil), which belongs to the Indsil group of companies, manufactures alloys for the stainless steel industry and offers various products including ferro chrome, low carbon silico manganese, ultra-low carbon silico manganese and ferro silicon. It operates a 75,000 TPA ferro chrome smelter in the Sultanate of Oman along with captive chrome mine resources. Its low carbon silico manganese capacity is 45,000 TPA across 3 smelters in India. The Indsil group also runs two captive power plants - a 21 MW hydro power plant in Kerala and a 12 MW Coal fired plant in Chhattisgarh. These captive power generation facilities in Kerala and Chhattisgarh make the smelters at these locations one of the most cost competitive units globally. This in turn has helped the group position itself as a low cost, high quality supplier in the low carbon silico manganese industry.
In April 2017, Indsil merged its operations with its unlisted group company Indsil Energy & Electrochemicals Pvt Ltd, which is around 1.3 times bigger. We believe that the rationale behind the merger is to consolidate the businesses of both the companies to create long-term value for the shareholders by unlocking value and bringing in a thermal power base to minimize the risk of its hydro power plant’s dependence on the monsoon, strengthen its financial position and increase leverage capacity of the merged entity. This merger was long due and the investor community may not be aware of this development as the promoters believe in keeping a low profile. Indsil’s fortunes are linked to the performance of the steel industry. It has recorded an average turnover of Rs.160-215 crore with meagre profits in the last seven years but has still paid dividends consistently along with a one-time bonus issue. Post the merger in FY18, it recorded a turnover of Rs.746.44 crore with PAT of over Rs.45 crore. Indsil may soon change its name to Indsil Energy & Manganese Ltd to reflect both its captive hydro and thermal power assets besides a possible listing on the NSE.
Indsil has reported profits consistently overcoming a recession multiple times when its rivals like Rohit Ferro Tech and Ankit Metals & Power literally went belly up. Keep an eye on this stock and buy on every decline for solid gains. Although this counter is illiquid, it has the potential to deliver multibagger returns in the next 2-4 years.