Naya Issue: Voltamp Transformers
Issue Opens:24 August, 2006
Issue Closes:29 August, 2006
Issue Size:4,883,840 (No. of Shares)
Focused on supplying to industries
Voltamp Transformers manufactures transformers. It has a capacity of 5,400 MVA capable of manufacturing transformers up to 50MVA / 132 KV class. It essentially focuses on industry segment and supplies to customers like Reliance industries, Jindal Steel, Siemens, ABB, Larsen & Toubro, Suzlon for applications in industries like petrochemicals, oil refining, cement, paper, pharmaceuticals, steel, and power plant. Building and service sector projects (17% of total sales) and the steel and metal (16% of total sales) industry are the main user industries.
As per an arrangement dated 5 December 2005 between Lalitkumar H Patel and Kunjal L Patel (continuing promoters) and Navinchandra R Patel, Bharat N Patel, Rashmikant Patel and Udyan Patel (selling shareholders), the selling shareholders will sell their entire 48.27% equity stake though the present offer for sale to exit from the company. No details about why they are exiting and whether they can compete with the company in future are given in the prospectus.
* As on June 2006, Voltamp Transformers had an order book position of Rs 248 crore. The industry segment to which the company supplies and the power sector to which it can supply in a bigger way in future are doing well and have good growth prospects due to large capex planned in various industries and the power sector.
* Voltamp Transformers had negative cash flows from operating activities in FY 2006 and FY 2003 due to large funds blocked in inventories, negating the benefit of lower credit periods associated with the industry segment (compared with the state electricity boards).
* A few raw materials such as CRGO, copper, oil, insulation, resin, and steel constitute over 70% of the sales revenue. Most of the raw material contracts entered by the company allow for cost escalation, but its contracts with customer usually have a committed price. If prices of raw materials continue surge, as they have been in the recent past, then its financial performance may come under stress.
Net profit in FY 2006 was Rs 70.55 crore. EPS based on net profit before extraordinary items (EO) works out to Rs 22.8. At the offer price band of Rs 295-345, the PE range work out between 12.9 and 15.1, respectively. TTM P/E of the Electric Equipment – Transformers sector is around 15.4. Voltamp Transformers is operating at 83% capacity utilisation and as of now does not have any expansion plans nor it is going to get any money from the present offer.
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