jayaswal neco industries
-- be and Make
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CMP: 10.80/- Recommendation: BUY
BSE code: 522285 Date: 24-09-2012
ISIN: INE854B01010
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Investors with a
long-term perspective and a high-risk appetite can buy this stock. Investors can take exposure in this stock,
considering the company's ability to cater the capex opportunity.
Company
background:
Jayaswal
Neco (JNE), through the integration of its group companies, is transforming
itself from a primary pig iron and steel casting producer to an integrated
steel producing company.
NAGPUR ENGINEERING COMPANY LTD.,
(NECO), the flagship Company of the Neco Group, was originally incorporated as
a Private Limited Company and obtained the Certificate of Incorporation on
November 28, 1972. It commenced commercial operations in 1976 for the
manufacture of cast iron pipes and fittings by setting up their first foundry
at Nagpur, Maharashtra. Subsequently the company was converted into a Public
Limited Company onNovember 21, 1985. In 1987, the Company's second foundry unit
for manufacture of the same product range was established at Bhilai inMadhya
Pradesh and with further increase in product demand, the third unit was
established at Anjora, Rajandgaon in Madhya Pradesh in October, 1991.
The company's principal customers are the construction industry and the Indian Railways. It also exports Cast Iron Castings for construction and Municipal requirements to Middle East and Japan averaging about 2000 MT per annum.The Company is the recipient of the Export Excellence Award from the Engineering Export Promotion Council in recognition of achieving highest export performance amongst the SSI exporters in the panel Cast Iron Pipes, Fittings and other Sanitary Castings for the year 1992-93. With a view to diversify its activity the company decided to set up a Solvent Extraction Plant with a crushing capacity of 500 TPD and refining capacity of 100 TPD. The company was offered a newly erected Solvent Extraction Plant having a crushing capacity of 200 TPD and refining capacity of 25 TPD which had begun its trial runs. This plant was erected by NAFPL, promoted by Mr. S H Agarwal & others, who were already in the business of trading in soyabean oilseeds & food grains. The Company then decided to take up the Plant and enhance its crushing capacity from 200 TPD to 500 TPD and refining capacity from 25 TPD to 100 TPD. In the process of acquisition, the entire shares of NAFPL were first acquired by the Promoters & Associates of NECO whereby it became a group Company; and further the entire Assets and Liabilities were purchased by NECO out of the Internal Accruals at book value. To effect the transfer of the Immovable Property i.e. Land, Building, Plant and Machinery etc., a Sale Deed dated March 27, 1993, was executed by NAFPL in favour of NECO.
FUTURE PROJECTS:
1. Rs 3700cr capex for capacity expansion is in pipeline.
2. The Company has
received sanction of term loans of Rs. 1800 Crores from ICICI Bank led
Consortium for the said projects.
3. The Company has
already started the work on various projects as above. The entire work is
expected to be completed by 2014-15. The Company has to infuse Rs. 965 Crores
by way of Equity and internal accruals.
4. During the year, the
Company has allotted 10,88,22,559 Equity Shares of Rs. 10 /- each for cash at a
premium of Rs. 30/- per Share on preferential basis to promoter Group companies
and others towards equity for funding the ongoing expansion projects. It is
proposed to increase the paid up Equity Share Capital further by issuing
7,00,00,000 Equity Shares of Rs. 10/- each for cash at the premium of Rs. 30/-
per share to raise further capital for the projects.
OUTLOOK:
The
company is planning big to become completed integrated player in the steel and
power space. The coal mines allotted are been permitted up to 2015 to develop.
Hence, one aiming for the 2015-16 can invest in this stock. It is a sure shot
multibagger call.
With thanks
Be and make
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