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Friday, April 10, 2009

V Guard Industries Ltd:-Future proespects and growth outlook

Scripscan:V Guard Industries Ltd
TRaded in:Nse-bse

Story:Kerala-based V-Guard Industries manufactures and sells voltage stabilisers, pumps, electric motors, cables, water heaters, UPS and fans.Started as a proprietary concern in 1977, V-Guard Industries was incorporated in 1996. Its stabiliser unit is its oldest and most profitable business, contributing 40% to its total revenue. The company claims to be present in 16 states, but the four southern states account for 95% of its revenues. Electric cables and solar water heaters are manufactured in-house. For the other products, the designs are done in-house and manufacturing is outsourced to SSI units in South India. This helps the company to minimise labour costs. V-Guard also generates power for captive consumption at its manufacturing unit in Coimbatore.The stabiliser market in India is fragmented.Total market size of voltage stabilisers in India is estimated at Rs 700-750 crore. V-Guard has 15% market share, the largest in the country.Given that consumer durables segment is growing 25% pa, the industry’s prospects seem bright. Pumps and cables are V-Guard’s secondlargest product categories, contributing 20% each to its total revenue.Customs duty cuts and the government’s thrust on agriculture, irrigation and rural electrification augur well for growth in the pumps segment. Boom in construction and housing industry is likely to benefit the cables business.VGuard gets significant tax breaks — solar water heaters are exempt from excise duty, while its upcoming cables plant in Uttaranchal will enjoy excise duty exemption for 10 years and I-T exemption for five years. At current valuations, the stock can be considered by long-term investors seeking diversification by putting their money in a multi-product company. But it remains to be seen whether the company will succeed where others have failed, given the current market situation. Nevertheless, the management is confident of success and I feel buying it for long term may prove to be beneficial for investors.

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