Download - EMCO Final Final
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Group :9
Sharad Chopra- 11Udit Adhlakha- 104
Amol Kumar- 109
Neeraj Bhardwaj-114
Atul Dugar- 120
Rohit Jain- 125
Varun Mittal- 137
Strategic Investment Opportunities forStrategic Investment Opportunities for
EMCO LimitedEMCO Limited
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Agenday Industry Overview
yCompany Analysis
yAcquisition Targets
yFinancial Valuation & Potential Synergies
y
Risks Analysis
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Industry OverviewIndustry Overview
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Indian Power Sector ScenarioIndian Power Sector Scenarioy Government plans to increase current power generation capacity
of 152GW to 200GW
y Vision 2012 has made an increasing number of rural areas and
villages get access to power.
y Inter Regional Power transmission to be raised from 20GW to
38 GW
y Privatization of Power Distribution to minimize T&D losses.
y Government experience a YOY shortage of 10% of its expected
capacity
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Power Industry OpportunitiesPower Industry OpportunitiesGeneration
Transmission
DistributionPower
Solution
EquipmentExport
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Government Regulations &Government Regulations &
ReformsReforms 11th Five Year Plan
Ambitious Plan to add 78.7GW of power generation
Rs 7500bn likely to be invested in Power Sector Government encouraged Private sector participation in transmission
sector.
12th Five year Plan
100,000MW additional capacity.
Electricity Act 2003y Removed Licensing needs for Power generation projects.
y Project allocation through competitive bidding
y National Tariff Policy 2006 promotes Private sector contribution
y Allocation of Captive Coal blocks to Private players to ensure fuelsecurity.
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Key Observations
For each MW of capacity added generates a demand for7-8 MVA Transformers across generation, T&D.
Replacement demand of almost 20,000 MVA`sexpected by 2012.
Huge capex investments expected in the sector which
were put on hold because of the economic recession.
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Company AnalysisCompany Analysis
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Name EMCOLtd. Sector: Power Equipment Industry
Brief
DescriptionIncorporated in the year 1964
Leading Electrical Technology and Solutions Provider in India.
3rd Largest manufacturer of transformers in India
Manufacture of power equipment viz. Generation Equipment and T & D
Equipment
Multi-Product End-to-End Solutions Provider for Power generation,
transmission and distribution
Operations in more than 40 countries
In the year 1996, the company diversified into manufacturing of electronicenergy meters and project division for construction of sub-station projects
Amongst the 100 fastest growing companies in India
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Company Shareholding
y Big MF`s like SBI Magnum
Midcap- Growth & Equity,DSP Blackrock, and BNPParibas to name a few.
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Performance in 2Q FY2011
Reported revenue increased by44%
OrderBook dropped by 70%
Transformer business marginshave dropped to 8% from 14% asa result of excess capacity.
Meter division showed a sharpincrease of 44%
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Performance vis-a-vis Sensex
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EMCO Product PortfolioEMCO Product Portfolioy Transformer Division :
Leading Manufacturer ofPower, Distribution, Furnaceand Rectifier Transformers .
yMeter Division: ManufacturesSingle Phase , High endelectronic Meters and RevenueManagement solutions.
y Project Division: Constitutestwo SBUy 1) Sub-station
y 2) Transmission Line
Also provides end to endsolutions for Transmission andDistribution of Power.
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EMCO Order bookEMCO Order booky Order book of Rs 1500 Cr
for FY10.
y
Provides a decentRevenue assurance forFY11.
y Transformer and Project
Division Constitutes98% of orders.
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Acquisition TargetsAcquisition Targets
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Companies ConsideredCompanies Considered
Options Acquisition targets Decision
Option 1 Power Generation Companies Rejected
Option 2 Meter Manufacturers Rejected
Option 3 Smart Maintenance Technology
Solutions Provider
Rejected
Option 4 Transformer manufacture Accepted
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Target Company
Accurate Transformers
AccurateTransformers
PowerTransformers
DistributionTransformers
y Higher EPS
y D:E of 0.51
y
Book Value and PE ratio isless
y ROCE is better
y Enterprise value is lesser
y
Transformers above 220KVNAINITAL PROJECT -Successfully executed this project worth Rs. 422 million andelectrified 35 villages with 11000ETAH PROJECT- Successfully executed this project worth Rs. 642 million and electrified741 villages with 12000 BPL Connections.
.
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Financial Valuation & Potential SynergiesFinancial Valuation & Potential Synergies
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Risk AnalysisRisk Analysis
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Business Risk
Competitor Risk
Regulatory
Overcapacity
Political Risk
Risk Analysis [1/3]Risk Analysis [1/3]
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Operational Risk
Efficiency
Capacity
Performance Gap
Risk Analysis [2/3]Risk Analysis [2/3]
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Financial Risk
Interest Risk
Default Risk Price Risk
Risk Analysis [3/3]Risk Analysis [3/3]
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OtherP
ossibleTargets
y Smart Maintenance Technology Systems (SMT)Provider
y
Mining operatorsy Thermal Power Plants
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Thank YouThank You