Strategic Investment Opportunities for

EMCO Limited

Group :9
Sharad Chopra- 11
Udit Adhlakha- 104
Amol Kumar- 109
Neeraj Bhardwaj-114
Atul Dugar- 120
Rohit Jain- 125
Varun Mittal- 137
Agenda
Industry Overview
Company Analysis
Acquisition Targets
Financial Valuation & Potential Synergies
Risks Analysis
Industry Overview
Indian Power Sector Scenario
 Government plans to increase current power generation capacity

of 152GW to 200GW
 Vision 2012 has made an increasing number of rural areas and

villages get access to power.

 Inter Regional Power transmission to be raised from 20GW to

38 GW
 Privatization of Power Distribution to minimize T&D losses.

 Government experience a YOY shortage of 10% of its expected

capacity
Power Industry Opportunities
Generation

Equipment
Transmission
Export

Power
Distribution
Solution
Government Regulations & Reforms
 11th Five Year Plan
 Ambitious Plan to add 78.7GW of power generation
 Rs 7500bn likely to be invested in Power Sector
 Government encouraged Private sector participation in transmission
sector.
 12th Five year Plan
 100,000MW additional capacity.
 Electricity Act 2003
 Removed Licensing needs for Power generation projects.
 Project allocation through competitive bidding
 National Tariff Policy 2006 promotes Private sector contribution
 Allocation of Captive Coal blocks to Private players to ensure fuel security.
Key Observations
 For each MW of capacity added generates a demand
for 7-8 MVA Transformers across generation, T&D.

 Replacement demand of almost 20,000 MVA`s

expected by 2012.

 Huge capex investments expected in the sector which

were put on hold because of the economic recession.
Company Analysis
Name EMCO Ltd. Sector: Power Equipment Industry

Brief Incorporated in the year 1964

Description
Leading Electrical Technology and Solutions Provider in India.

3rd Largest manufacturer of transformers in India

Manufacture of power equipment viz. Generation Equipment and T & D

Equipment

Multi-Product End-to-End Solutions Provider for Power generation,

transmission and distribution

Operations in more than 40 countries

In the year 1996, the company diversified into manufacturing of electronic
energy meters and project division for construction of sub-station projects

Amongst the 100 fastest growing companies in India

Company Shareholding
Big MF`s like SBI Magnum
Midcap- Growth & Equity,
DSP Blackrock, and BNP
Paribas to name a few.
Performance in 2Q FY2011

Reported revenue increased by

44%

Order Book dropped by 70%

Transformer business margins

have dropped to 8% from 14% as
a result of excess capacity.

Meter division showed a sharp

increase of 44%
Performance vis-a-vis Sensex
EMCO Product Portfolio
 Transformer Division : Leading
Manufacturer of Power,
Distribution, Furnace and
Rectifier Transformers .
 Meter Division: Manufactures
Single Phase , High end electronic
Meters and Revenue Management
solutions.
 Project Division: Constitutes
two SBU
 1) Sub-station
 2) Transmission Line

Also provides end to end solutions

for Transmission and Distribution
of Power.
EMCO Order book
Order book of Rs 1500 Cr
for FY10.
Provides a decent
Revenue assurance for
FY11.
Transformer and Project
Division Constitutes
98% of orders.
Acquisition Targets
Companies Considered
Options Acquisition targets Decision

Option 1 Power Generation Companies Rejected

Option 2 Meter Manufacturers Rejected

Option 3 Smart Maintenance Technology Rejected

Solutions Provider
Option 4 Transformer manufacture Accepted
 Target Company
Accurate Transformers
Higher EPS
Accurate
Transformers
D:E of 0.51
Book Value and PE ratio is
Power Distribution less
Transformers Transformers
ROCE is better
Enterprise value is lesser
Transformers above 220KV

NAINITAL PROJECT  -Successfully executed this project worth Rs. 422 million and
electrified 35 villages with 11000
ETAH PROJECT- Successfully executed this project worth Rs. 642 million and electrified
741 villages with 12000 BPL Connections.

.
Financial Valuation & Potential Synergies
Risk Analysis
 Risk Analysis [1/3]
 Business Risk
 Competitor Risk
 Regulatory
 Overcapacity
 Political Risk
 Risk Analysis [2/3]
 Operational Risk
 Efficiency
 Capacity
 Performance Gap
 Risk Analysis [3/3]
 Financial Risk
 Interest Risk
 Default Risk
 Price Risk
Other Possible Targets
Smart Maintenance Technology Systems (SMT)
Provider
Mining operators
Thermal Power Plants
Thank You