emco final final

8/8/2019 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



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Financial Risk

Interest Risk

Default Risk Price Risk



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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

emco final final

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