Multi Baggers

Jyoti Ltd

Jyoti Ltd. is a leading manufacturer of pumps in the country and caters primarily to the Water, Irrigation and Power sectors. The company manufactures Large Pumps, Motors and Generators.

The  Company  has  a presence in the  Small  Hydel  Sectors,  Water Handling Sector, Lift Irrigation  Sectors and also in the Wind Energy sectors.

The company has lately diversified in the field of Wind Power and has taken number of steps for the development of Wind Turbine with latest technology and its commercialization through development of Wind Farms. The company manufactures indigenously designed and developed Permanent Magnet Synchronous Motor for manufacture of Turbines.

Financials:

The latest Financials of the company are given as under :-

(Source : Capitaline)

Conclusion & Investment Rationale:

Jyoti Ltd. has been in existence for over 60 years and manufactures Large Pumps, Motors and Generators for core Infrastructure sectors like Water, Irrigation and Power. Besides, the company is sitting on huge real estate assets. The company has 15 acres of land close to Vadodara Railway station, which has potential to be exploited commercially. This can be achieved by relocating the company’s production base elsewhere. The company had shortlisted Mogar, near Anand as a possible alternative.

The stock of Jyoti Ltd. suffers from a few negatives. The company has high debt – the company paid an interest of roughly Rs 14 crores for FY 09. An interest cost of Rs 14 crores on EBIDTA of Rs 22 crores leaves the company with poor Interest Cover. The high interest cost has been a big drag on the profitability of the company. Low promoters holding of around 22% is another cause of concern. Moreover, the company suffers from Information dissemination issues like voluntarily disclosing status of execution of various orders and new orders received or holding periodic Investor or Analyst conferences.

On the positive side, the company has a very healthy order book of Rs 1000 crores. The company has last year bagged orders worth Rs 541 crores (Jyoti’s share of the orders in JV) for supply of pumps for Irrigation and Drinking Water projects from the Karnataka Neeravari Nigam Ltd (KNNL), set up by the Karnataka Government. Jyoti Ltd. is responsible for complete electro-mechanical work with associated control and instrumentation system, including transmission line of 110 KV and 220 KV along with sub-stations. The pumps would make available water for irrigation to 1.07 lakh hectares of farm land in Karnataka. Besides, nearly 20 lakh people in about 315 villages and some urban areas in drought-prone belt would be supplied drinking water from 700 water tanks to be set up in the southern State. This is the single, largest electro-mechanical package awarded to any pump manufacturer in India and is to be executed over 3 year period. The company had also received turnkey order worth Rs 27.24 crores from Aravali Power Co. Pvt. Ltd. (A Joint Venture of NTPC, HPGCL and IPGCL) for design, engineering, supply, erection, testing and commissioning of cooling water system and make up water system for Indira Gandhi Super Thermal Power Plant — Jhajjar

The company has successfully executed a Rs 250 crores project received from the JV of Hindustan Construction Co. Ltd and Nagarjuna Construction for Godavari Lift Irrigation Scheme in Andhra Pradesh. The company is looking for more orders for other upcoming irrigation schemes of Gujarat, Chattisgarh, Karnataka and Andhra Pradesh.

We believe that successful execution of the Rs 250 crore Godavari Lift Irrigation Project and also of the Rs 541 crores project from Karnataka Government will qualify the company for various other large Water and Irrigation projects in the future. Government’s impetus on Irrigation and Water with large outlays and also the large capacities coming up in Power sector augur well for the company and provide significant revenue visibility to the company.

We believe that the negatives look fully discounted in the current market price of the stock and the possibility of the stock drifting down too much, at least in the short to medium term, from the current levels looks low. Investors can choose to accumulate the stock at the current price and on declines.

Ashish Chugh is an equity analyst and investment consultant based at New Delhi, INDIA. At the time of writing this article, he, his firm and dependent family members have a position in the stocks mentioned above. The author, his firm or any of his dependent family members may make purchases or sale of the securities mentioned in the report while the report is in circulation. The author invites readers to send him email and welcomes comments, feedback & queries at nexgenfin@yahoo.com.
 
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