CompanyWatch - Indo Asian
indoasian.com
Indo Asian Group Companies.
Indo Asian Fusegear Ltd.
Indo Kopp Pvt. Ltd.
Indo Asian Marketing Ltd.
Indo Technoelectric Pvt. Ltd.
The compact stock
The improvement in Indo Asian Fusegear's first quarter performance has come on the heels of internal restructuring and new products. Smart Investor analyses
Delhi-based Indo Asian Fusegear, an electrical energy and power safety devices company, has posted impressive results in the first quarter ended June 30, 1999. In the quarter, Indo Asian has more than doubled its turnover and net profit to Rs 14.6 crore and Rs 0.33 crore respectively. The improvement in performance has come on the heels of internal restructuring and new product areas.
Indo Asian manufactures varieties of switch gears (electrical devices) including fuse switches, distribution boards, switch panels and HRC fuses. Switch gears which is the core business of the company accounts for 60 per cent of its revenues. Last year the company launched Goldline series of miniature circuit breakers (MCBs). This product has been developed in collaboration with Heinrich Kopp of Germany. It also introduced another series of MCBs under the Silverline brand.
The company has taken several measures to ensure a steady stream of new product in the lighting range. It added a new product to its lighting range, compacted fluorescent lamps (CFL), under the Ecolite range. The range is manufactured at its newly commissioned, 7.5 million CFLs per annum capacity plant at Noida, Uttar Pradesh. The new plant has been further extended to manufacture integral CFLs and electronic ballasts, luminaries and other allied lighting fittings for industrial, commercial and domestic applications. The global trend of replacing ordinary GLS lamps by CFLs is expected to benefit the company in the coming years. The company says its Ecolite range of CFLs consume 20 per cent less energy and lasts eight times longer than conventional bulbs.
The company also undertook major internal restructuring with the help of Eicher Consultants to reduce costs and achieve greater efficiency. The marketing operations were revamped and brought under the company. Further, it has entered into an agreement with Microsoft and BaaN Information Systems to implement Enterprise Resource Planning Solution (ERP) at a cost of Rs 2 crore. This will ensure optimum utilisation of resources. This package will connect all its marketing offices online and provide real-time information.
In early 1999, Indo Asian became the first Indian company to get certification under the International CB Scheme which ensures product approval in over 65 developed countries. This will further boost its exports. In 1998-99, exports increased to Rs 1.5 crore from Rs 0.81 crore in 1997-98. Currently, the company exports to the Middle East, Europe and the US.
For the year ended March 1999 the company posted a turnover of Rs 39.05 crore, an increase of 22.5 per cent. However, net profit declined by more than 30 per cent to Rs 1.04 crore. Its bottomline has taken a beating mainly due to expenses incurred in the launch of new products. Marketing expenditure has gone up from Rs 0.55 crore to Rs 0.85 crore. Interest cost has also increased 40 per cent to Rs 3.43 crore due to sizable capital investments in the CFL project. The commissioning of the CFL project resulted in higher depreciation costs at Rs 2.12 crore. Its additional costs of operations has resulted in net cash outflow of Rs 1.12 crore.
However, a substantial improvement in turnover is expected to boost its bottomline in the year. Its CFL line of business is expected to earn profits for the company in the future as energy and environment concerns come to the fore. Says V P Mahendru, chairman and managing director, "CFL is going to be a major business for us in the coming years as demand for the products is tremendous. We have already commenced a second shift of production."
On the future prospects of the company Mahendru says, "Traditionally, in the switch gear industry the first quarter is comparatively lean. Demand from the government starts flowing in from the second quarter." On this assumption he expects the turnover to cross Rs 60 crore this year and the net profit to more than double. Its current EPS of Rs 1.12 discounts its price 13.4 times. Though this appears on the higher side, the company has many positives. Its first quarter results, along with the performance of the CFL segment, has been impressive. Further , it has some equity restructuring in mind, as it has approached its shareholders to seek permission for a buy back of its share. The scrip has jumped almost 50 per cent in the last week but is still worth a look.
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