Ind­sil Hy­dro Power & Man­ganese Ltd: Re­silient chrome

Money Times - - Expert Eye -

(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.

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