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Wednesday, August 26, 2009

Technocraft Industries India Ltd:Future growth prospects and outlook

Scripscan:Technocraft Industries India Ltd

Story:Technocraft Industries India (TIIL) is an interesting diversified company. Its three divisions: drum closures, pipes & scaffoldings and cotton yarn have nothing to do with each other. It has two subsidiaries which are in related businesses. One makes garments (Danube Fashions Ltd) for exports and the other has launched a local garment brand, Haute Chilli. The largest of these businesses has been that of drum closures which contributed 27% to the turnover and 40% to the operating profit at the time of its IPO in early 2007. Drum closures come in huge varieties – flanges and plugs, seal gaskets, epoxy and phenolic lacquered finish closures, stainless steel closures, special design products and innumerable varieties of lever-latches and drum-locking rings. The company markets drum closures to 60 countries through its subsidiaries in the UK, Poland, Hungary, Germany and Australia. Under its pipes & scaffoldings division, the company makes black pipes, galvanised pipes and tubes, painted pipes, black threaded pipes and galvanised threaded pipes which are used in irrigation, construction and transportation of gas, water and chemicals, etc. The company’s cotton yarn division manufactures and exports 100% cotton ring spun yarn. It also operates an apparel brand, Haute Chilli, which has stores in Mumbai, Ahmedabad, Surat and Nashik. Danube Fashions, which makes garments for the export market, is being merged with TIIL. Business is good and TIIL is expanding its capacity. In the drum closures division, it is planning to hike the capacity of flanges and bungs from 100 million to 136 million pieces and the capacity of clamps from 20 million to 23 million pieces. In the pipes division, the company intends to double its annual capacity for scaffolding products, from 12,000 tonnes to 24,000 tonnes. Similarly, in the yarn division, the company is increasing its spinning capacity by 25,200 spindles. TIIL is also setting up a 15MW captive power plant of which the yarn division would use 7.5MW. By March 2009, the textiles division will contribute almost 35% of revenues and scaffoldings & tubes will contribute about 50%.2009-10 should see a substantial jump in turnover and profits. At the current price of Rs38 it attracts a marketcap of just 100crs. This would mean an extremely cheap market-cap to sales ratio .Buy with a one-year horizon. It is one of the cheapest small-cap stocks going.

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