Voltamp Transformers

(amit anam) #22

Using low quality raw material has always been concern for the industry, below is the news :-

Is DRI sparing big fish using non-prime steel for transformers?


New Delhi, Dec 8 (KNN) After initial crackdown against transformer manufacturers using non-prime steel, mostly those headquartered in Rajasthan, the Directorate of Revenue Intelligence (DRI) seems to be going soft on this illegal trade, leaving the industry to wonder why big fish are being spared.

Industry sources said that a big name in large electrical equipment and transformer association headquartered in Mumbai, who has been patronized by big sharks, has never complied with the quality control order issued by the Steel Ministry to bar import of second-hand CRGO. Not only that, it has been conspiring to take the matter for cancellation of the order in parliament using its proximity to some Members of Parliament and high-level bureaucrats at the Centre.

Industry players told KNN on the condition of anonymity that the recent raids by the DRI on a handful of non-prime CRGO traders in Rajasthan are unlikely to make any impact given that this malpractice is rampant and in Rajasthan alone, there are more than 100 units involved in processing of the low-quality steel brought from overseas.

“It is tip on ice berg; action should be extended to other states of the country. Unless DRI catches big fish who are manufacturing power transformers, this menace will not stop,” said one manufacturer.

Given the financial loss being suffered by utilities due to use of dubious quality steel in transformers, the source said, “Any amount of re-structuring and investment shall not bear any fruits and the target of providing 24x7 power to all in the current 12th plan period could prove a pipedream.”

The source added, the use of spurious material in the manufacture of equipment is also responsible for the financial mess in the power sector.

“So far no action has been initiated against traders getting the spurious CRGO from abroad in SEZ zones and freely selling the material to manufacturer of power distribution transformers,” the source said.

Dwelling on the modus operandi of this illicit trade, the source said, importers/ processors get the non-prime, mills left over, scrap, spurious CRGO material from all over the world in SEZ zones. Since these zones are not subjected to any rules and regulations for customs clearance at ports, material is stored in the godowns there and sold to the manufacturers of power and distribution transformers at dirt cheap rate of 30 per cent of prime material price.

The source further said that in a recent case transformers exported to one country were rejected and shipped back to the Indian exporter, giving a bad name to the Indian industry.

“Concerned authorities have been informed of this malpractice but there is no action,” the source said.

“Unless the Government of India takes severe action against such manufacturers and trade, this menace will continue as it has been going on for last two decades and the quality control order will remain just on paper,” the source added. (KNN Bureau)

(rohithpotti) #23

I had attended a call in May 2016 on Indian transformer industry where Mr. Kaul of Indian Transformers Manufacturers Association gave the participants a brief about the industry.
Key points are below:

  • The industry size is around 13,000cr to 15,000 cr and comprises around 700 players. Each MW of power capacity addition requires 7MVA of transformers, and the current focus on power generation would support the transformer industry
  • Current industry capacity is 1500 GVA and the utilization is 40 to 50%. Organized sector forms 75% to 80% of the total
  • Huge orders are being placed by public participants like PGCIL and SEBs currently, but this would still take the industry
    capacity utilization to only ~70% by 2017.
  • Industrial transformers, which form around 15 to 20% of the total production, and as per Mr Kaul there is no demand uptick happening in this space currently
  • Pricing of transformers seems to be under pressure as the SEBs and PGCIL have revamped their bidding process and this has reduced cartel formation as per Mr. Kaul.

(distilled_feni) #24

I was just going over the financials of the company and peeking into their 220 crores investments which is 20% of its market cap. Their OTHER income for 2016 was 28 crores (which was mostly from the interest, dividends and gain on investments). If the trend continues their other income will be higher than their operating profit soon.

Out of the 220 crores , 117 crores is in mutual funds and 42 crores in PMS including 17 cr with Ask Wealth Advisor Pvt. Ltd. PMS (Anyone knows how they are doing ? Do they have any multibaggers? lol) and about 1 crore with Motilal Oswal PMS. Rest is in bonds, FD’s etc.

From the 2016 AR

The Company has continued investment of surplus funds available, in various debt and equity schemes of mutual funds, fixed deposit with banks, debentures and bonds, PMS, tax-free bonds,etc. and earned a reasonable return on the same and the Company has also expanded its investment portfolio, from time to time. The receivable position and inventory holding level is not improving and higher investment in receivables and inventory has become reality for the Company to live with. In this uncertain market condition, the Company has limited options to deal with this situation.

I was also reading in the Transformers and Rectifiers thread about the competition in this segment which is huge and I see no near plans of voltamp to do capex, also the current capacity util is around 70%. On one hand you have company like TRIL which has increased its capacity by over 4 times since 2008 onwards and planning on raising huge QIP. Voltamp has zero debt and there has been no equity dilution. In good times that is year 2005 - 2009, their sales grew at cagr of 38% and PAT at 66%. So it looks like they do have execution capabilities when the demand comes back ?

How do you really play voltamp ? What is your take on their investment route ? Is this a super safe bet with limited downside because of their debt ,investments and reasonable valuations, which should do reasonably well during the power cycle proven by their past record ? Would love to hear views of the senior investors.

disc: invested

(Chirag) #25

Voltamp has managed to show YoY BL growth even though YoY TL has fallen. This is mainly because of “Other Income”. How can I find out what that Other Income is? PL statement does not provide the details.

Do update if you have any information regarding the same. Thank you.

(Raj) #26

@investr look at their previous year annual report. I assume other income are from their investments.

(Hardik) #27

Tax is also lower at 20.3% vs. 27.1% as compared to previous year. OI and lower tax has contributed to higher BL inspite of TL falling by 25%.

(distilled_feni) #28

(distilled_feni) #29

AR - http://www.voltamptransformers.com/userfiles/addedPDF/annualreportPDF/50th_Annual_Report_2016-17.pdf

As on date orders available for execution in the current year amount to 310 crores (5200 MVA) providing revenue` visibility for about 7 months period.

Overall commentary of the management is not very positive on the demand growth -
"In spite of the Government’s continued efforts to provide a fillip to the power sector by way of schemes like the UDAY, 24x7 Power for all, 100 per cent electrification of villages and the introduction of transparent mechanisms such as competitive bidding for the allocation of resources like coal, utility performances did not show any significant signs of improvement in current financial year. The Industry continue to live with surplus capacity resulting in continued pricing pressure. The outlook for the sector is improving with slow pace. "

(distilled_feni) #30

Good set of numbers YoY

12 % growth in Revenues from Ops.
30% growth in PAT and EPS.

update: YoY and not QoQ. Thanks Chirag for correcting.

(Chirag) #31

Did you mean “YoY”? Because QoQ the numbers are down. While YoY they are up.

(sanjuthom) #33

The ‘Saubhagya’ scheme will mean a good opportunity for transformer suppliers particularly in the smaller capacity like sub 220 KV transformers, which will find their applications in connecting the remote villages with relatively less density of consumers. Companies like Voltamp Transformers are the leading players with lot of spare capacity in the sub-220 KV segment. Voltamp, which is sitting on cash (25 percent of market capitalisation), operated at capacity utilisation of 78 percent in FY17 and sitting on good order book providing improved earnings visibility.

(vishal kumar) #34

Voltamp Result:-

(Alok Bhola) #36

The Q1FY19 results are out. Revenue has grown by a healthy 28% YoY. However, upon first glance, the profit growth (PAT up by a mere 4% YoY) appears fairly mediocre.

However, a slightly closer look presents a very different picture of profit growth. As this Company has significant cash holdings, the Other Income component (primarily interest and other income from cash and financial investments) is quite high and needs to be removed in order to analyze operational profitability. Similarly, the Income Tax rates have been somewhat fluctuating over the past few years, distorting YoY profit comparison.

Hence, my favorite metric for analyzing YoY growth in operational profitability for this Company is PBOT (Profit Before Other Income and Taxes). The PBOT has grown by 82% YoY, indicating very healthy performance at operational profit level. In fact, the PBOTM bottomed out in FY14 at 1.6% and has been steadily rising since, reaching 9.7% for T4Q Q1FY19.

The reasons of mediocre PAT growth despite such healthy Operational Profit growth are: a) fall in Other Income and b) rise in Income Tax rate over Q1FY18.

With a strong track record, zero debt, and cash holding of Rs 360 cr, Voltamp is well placed to benefit from the expected capex upswing in the economy over the next few years. The valuation (P/E of 13.0 and P/B of 1.5) don’t seem to capture the growth prospects.

Disclosure: Invested.

(Alok Bhola) #37

The Q2FY19 results are out. However, as in the last quarter, the Other Income has decreased and Income Tax rate has increased, hence the anaemic bottomline growth is betraying the excellent business performance.

Revenues have grown by 47% YoY and the Profit before Other Income and Tax has grown by 147% YoY.

However, a significant decrease in Other Income (from 14 cr to 6 cr) and increase in the Income Tax rate (from 26% to 34%) have eaten away all of the PBOT growth and the Net Profit growth is flat YoY.

(Rajat Setiya) #38

In this quarter (Q2’19), gross margins appear to be low but because of increase in realizations (from 5.4lacs/MVA to 7.5lacs/MVA) gross profits per MVA increased by 33% to 1.56 lacs/MVA. Similarly EBITDA/MVA doubled 76000/MVA from 38000/MVA.

These numbers look good for H1’19 as well, EBITDA/MVA increased by 70% vs H1 2018 and 20% vs full year FY18.

Improving profitability is a positive sign worth noting. Commentary on cement, auto, paper, textile, tyres, chemicals, and oil & gas has been positive and bodes well for V.

However, these positive data/commentary/indicators are there for only few quarters, unless the trend continues for another couple of more quarters one can not be sure of a structural revival in industrial capex.