HBL POWER SYSTEMS: Booting-up for the Race of the Century

BSE Code: 517271, NSE Code: HBLPOWER
HBL Power Systems Ltd is in the business of manufacturing world’s widest range of specialized batteries since 1977, with particular focus on Aircraft batteries. Recently, they have focussed on engineered products and services and to defence and railways department for manufacturing of batteries for telecommunication, Rly-signalling, inverter batteries, UPS batteries etc. They have also diversified to manufacturing of spun pre-stressed concrete electric poles, piles, telecom towers and other spun pre-stressed concrete products, which are within the perview of ‘Green Technology products’. Their latest focus is on Solar products like Solar PV Cells and Solar roof-top panels etc., along-with Solar Pumps and carrying out projects for roof-top solar systems.
Plants of the Company are located in Shamirpet (Hyderabad), Visakhapatnam, Vizaynagar, Haridwar (Uttarakhand) and Manesar (Haryana). All plants are of different world class standards fulfilling required certifications like ISO 9001 2008, OHSAS, Intertek EU Compliance, IRIS, EASA, NABL, MNRE, UL Certificate etc.
Main clients of the Company are HAL, Indian Railways, Indian Navy, and different Oil exploring Companies, Power & Telecom Companies for back-up and starter battries. Recently they have roped in Boston with the Massachusetts Bay Transportation Authority as their client for a range of batteries with transparent, flame retardant battery cases for metro and light rail applications.
SUJALA - Solar pump: Solar pump is another upcoming market segment and with affordable technology availability (running the existing AC-3phase submersible pumps with solar through a specially designed controller). This product is becoming very popular among farmers opting for solar power in remote villages. Government bodies also are encouraging the solar pumps with suitable subsidiaries and loans.
Spun Concrete Poles - Recent development of Spun Concrete Poles is an excellent option for WIND Energy projects due to its circular form and absence of edges/angles, the magnitude of wind forces acting on it is less than on rectangular pole for the same projected area and wind forces are diffused because of circular structure. These poles are available in the height of 11-13Mtr single segment, hence can be used for double & triple circuit also.
HBL SOLAR: HBL provides SOLAR PV Roof Top systems from 1 kW to 100 kw in Off-Grid (Grid supported) and On-grid modes. It has the advantage of having all the components of the system like modules, batteries, PCU (inverter) and galvanized structure made in house and tested to the required standards. The company has got the flexibility to offer tailor made solutions to the customers with space saving module mounting structures. Further, it has an in – house Engineering team who can visit the site and suggests the best solution to fit in the budget.
HBL Rentar Fuel Catalyst – It brings multiple benefits to users while at the same time helps clean the environment of noxious emissions and harmful greenhouse gases. HBL Rentar Fuel Catalyst is a product of Rentar Environmental Solutions Inc, USA - a global leader in pre-combustion technologies, striving to provide solutions that benefit the environment significantly. HBL Rentar Fuel Catalyst enjoys several patents globally and has been proven to reduce fuel consumption and harmful emissions from furnaces, boilers and generators. It is a contact type catalyst that brings about fuel savings on liquid and gas fossil fuels like Diesel, Furnace Oil, piped Natural Gas etc, in on-road or off-road engines, and equipment like HEMM, furnaces and boilers. Savings through use of HBL Rentar Fuel Catalyst range from 2% to up to 30% while reduction in emissions is found to be up to 44%. While the investment on HBL Rentar Fuel Catalyst can be recovered within a few months, the unit continues to deliver benefits to the buyer during the rest of its long life. The life of HBL Rentar Fuel Catalyst is 100,000 working hours which is over 11 years on 24x7 basis. The performance of HBL Rentar Fuel Catalyst has been proven in test laboratories of international repute and the benefits are being enjoyed by customers across the globe on thousands of installations.
In railways, they have developed instruments and equipment like Data Loggers, Audio frequency track circuit, Electronic interlocking system, train management system, SPAD alert system, Digital axle counter, Project system, Rail system unit etc., which are modern control & safety products mostly required by the Indian Railways.
As can be seen from the above products list, the Company not only have presence in India but in America, UK, Europe and Middle-East having recently established offices in various locations. As on 31.03.2017, the company has four Subsidiaries, viz; HBL Germany GMBH, HBL America Inc, SCIL lnfracon Pvt Ltd and HBL Suntech LLP, and also has one Joint Venture Gulf Batteries Company Ltd.(Kingdom of Saudi Arabia.
Share Holding Pattern:
Year 2011 2012 2013 2014 2015 2016 2017
Total share (No. Cr) 25.30 25.30 25.30 25.30 25.30 25.30 27.72
Promoter (%) 72.47 73.62 73.83 73.93 74.06 74.13 74.24
Pledged (%) 1.04 9.07 11.19 0.01 0.00 0.00 0.00
MF (%) 1.71 1.54 1.41 0.09 5.12 7.91 8.47
Bank/Institutions (%) 0.03 0.00 0.00 0.00 0.07 0.16 0.07
FII (%) 7.63 7.66 7.01 6.94 0.18 0.06 0.04
Bodies Corporate(%) 7.54 7.08 7.09 7.41 6.88 2.74 2.02
Public (%) Balance Balance Balance Balance Balance Balance Balance
Dividend paid/declared:
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
15% 15% 30% 30% 10% 15% 15% 20% 20% 25% 25%
Year 2011 2012 2013 2014 2015 2016 2017
Sales (Rs. Cr) 995.00 1089.50 1197.40 1280.79 1330.07 1395.70 1529.86
NP(Rs. Cr) 16.45 9.6 20.44 45.01 14.62 6.851 32.20
NPM % 1.65 0.88 1.71 3.51 1.10 0.49 2.10
EPS (Basic) 0.65 0.38 0.81 1.78 0.58 0.16 1.16
In March/17 Annual Results only the standalone figures are published because data from the subsidiaries are not received till now. In this year a loss making entity named Beaver Engineering & Holdings has been merged with the company for which a negative impact of 2.794 Crores are discounted with annual results. The company has a cash reserve of Rs.598.75 Crores as on 31-03-16 and a debt of Rs.430.10 Crores.
Due to their in-house product development with modern technologies and the Indian Govt’s initiatives for power saving, modernisation of railways and thrust on agriculture, renewable and green power etc. demand for their product is slowly growing. Increase in Annual Sales figures proves the same.
The only risk is the international price of metals like Nickel and Cadmium, which may however be passed on to the customers. The company is well established face the challange of the Century like Giants in the Indian Stock Exchanges. I think it is the miniature form of biggies like Amara Raja Batteries but diversified well with other products as per the need of the hour. By investing in this company for a long period one has hardly to lose anything because of the dividend yield which is currently 0.57%.

Disclosure: I have 2500 shares acquired at Rs.43/- per share.


Further to my above post, I have to post another important observation:
In the Mutual Fund category, currently HDFC TRUSTEE COMPANY LIMITED - HDFC PRUDENCE FUND holds 1,33,36,301(5.27%) and IDFC STERLING EQUITY FUND holds 74,08,155(2.93%) shares. These two funds are increasing their stake consistently year after year, which is another factor to feel safety by small individual investors for long term investment.

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I liked the business analysis that has been done! However there are few points which I would like to highlight:

  1. Net profit margin is low (1.5% in 2016) & other expenses have increased to 14% in 2016
  2. D/E:0.9 high, ROE:3.24 & ROCE:2.62 low; OPM % is 10% - Not good
  3. Other income is 17 cr out of 100 cr PBDIT in 2017. Any idea what this other income is?
  4. Net profit & sales has grown drastically in 2017. What are the reasons for this?
  5. Inventory has been always very high except in 2016 when it reduced to 390 - good
  6. In last 5 years PAT has grown 15% CAGR - good

Overall, when I see 2y pattern of stock… it is just going up & down between 30-55.
Tried to do technical analysis of stock -
Stock valuation by PE: 59 <Assuming company will grow 7% in 2018 & 2019 + NPM% of 1.6>
DCF valuation goes for a toss because of current assets & gross block.

Your story looks promising however numbers are not in favor!

Disc: Not invested as of now

Actually, I am not an analyst. So, cannot tell anything in answer to your questions. I just compiled data available in Company’s website and BSE website.

Just to add two cents on the management -

  1. This is the company which had decided on the tie up with Igarashi Motors, which gives a plus for capital allocation. Although later due to the financial crunch created by Solar inventory (which is a minus on capital allocation), they had to sell their Igarashi stake to avoid bankruptcy.
  2. Promoter believes in delegation of authority and responsibility, and therefore two years back separated the verticals into electronics and batteries. Also appointed an ex Amara Raja senior executive to decide on the retail foray.
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Doesn’t the title “Booting-up for the Race of the Century” seem misleading ???


Cash flow from operations are down, any reasons


Thank you for the information provided so far. Lately, I have also started looking at this scrip and done DCF as per the technique given in Zerodha varsity. Kindly have a look and pl point any discrepancy/ error if you find.DCF - HBL POWER 27 Jan 2018 .xlsx (5.6 KB)

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Looking good technically now. With very strong supports at 29 and 32. Looks like smart money started flowing in. This quarter nothing might be new with the results. Lets see anything new in annual report and AGM. Decent demand for their products

One more clarification if possible pls inform whether this company is in Lithium Battery manufacturing also?

It is in the race…

Barclay’s holding the majority stake as promoter.
After their entry HBL power fortune’s changing? It seems like that …
1.Their debt reduced almost to zero
2.Electronics division has higher margins and contribution from this division is going to increase in the upcoming quarters

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Dear Ganesh- Valuations like PE, ROE, ROCE etc., are the lag indicators but the multi bagger stock picking comes from the lead indicators like quality of the management and their vision. If management is going in right direction that is well enough for any investor other than looking for investor presentation. Their AR is wonderfully designed and sufficient data is available.

There are no specific tools to judge the management but we can access the direction of the management.
Barclay’s took the majority stake in the company as promoters and fortunes changing for investors.
They focused and developing high margin business and improving their base in electronics and defense verticals.
Their debt reduced to almost zero.

Very big and ambitious projects on the anvil. EV theme, defense, electronics etc., are some themes which can improve the revenue and margins in the upcoming years.

I found from the company’s website that this is already in to renewable energy related activities. Further the information related to Electric Vehicle is interesting.
Any update on EV by the company pls share.



After approval of 4G spectrum to Railways. This upgradation will pace up

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We need @phreakv6 to do a deep dive into this company.

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Can you share the news or Disclosure document of Barclays taking over the company. Found nothing on web or company website. One HBL bank did take over Barclays Bank of Pakistan !!

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Dear Summer
You can check this in promoter share holding…

With thanks
Be and Make

The company is planning to set up its own manufacturing facility at Mahbubnagar, Hyderabad to manufacture Lithium Ion cells and Electric Drive Train (EDT). The total cost for proposed capex is expected to be around Rs. 110.00 crore to be completed in two phases.
The capex is proposed to be funded through term debt of Rs.80 crore and balance through internal accruals. The Phase I of the project is envisaged to achieve COD by Q4FY22 and Phase II will be started on successful completion of Phase I.
Timely completion of the said capex make the stock to Re-rate.

With thanks
Be and Make


What’s the general opinion on HBL Power? Haven’t been able to find much news on them? How are they placed relative to other companies?
From their website them seem to be a very interesting company with locally developed solutions for the battery, rail and EV market. However no news hype at all for this company.