I did attend the conference call (wasn’t able to ask the questions). These guys have summarized the conference call at https://financialmonk.in/shakti-pumps-conference-call-updates/ Basically, the company says they can do around 2000-2500 cr sales (breakup given in website) and at 9% PAT Margins, they are guiding for 180-225 crores of net profit. If they can do this (a big if, considering 1 lac solar pump orders from EPC and OEM), they could easily get a market cap of around 5000-6000 crores on next year’s earnings (with a lot of growth ahead). I think there is enough opportunity, but the promoters seem too optimistic. At 15x PE (5x FY22PE), considerable margin of safety at CMP.
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For posterity, in 2014 management had guided for 400cr sales in 2015. Actual sales in 2014, 2015, 2016 were 292, 296, 264 (in cr).
Another one:
Actual sales in FY16 were 264 cr.
Make what you must of their guidance, but do take it with a pinch of salt.
Disc: studied the VP thread and decided to give it a skip.
EDIT: I have received a message from an investor of this firm that I am doing a disservice to the investor community by posting this message based on shallow research. So wanted to expand this post a bit more by expanding on my reasons for giving it a skip.
- Promoters guidance is always too bullish. Not conservative. (already showed 2 examples above). This is something which puts me off in general wrt investments. hester biosciences is a wonderful business where company overpromises and under delivers. I try to stay away from such businesses. I am sure other investors would make a lot of money, but i am ok to miss out.
- They made repeated false claims that their pumps are only ones which run on AC not DC. They also made similar claims about being only ones with Solar pumps. I do not know if this shows incompetence or maleficence but it definitely shows inaptitude to track competition.
- There were some RPT wherein the actual solar pumps where manufactured by a promoter non listed entity then bought by the listed entity.
- Promoter entity potentially engaged in some circular trading in July 2017.
- Company had 27% selling expenses in FY14 which seems simply too high.
- Nov’17 SEBI notice and penalty for failure to make disclosures
- Company chose to capitalize the branding expenses. Not that there’s anything wrong with it, just that this is not conservative accounting.
Finally, everyone has their own risk profile and investment style. It does not meet my investment criteria but that definitely does not mean no-one should invest. I have my limitations and work within them. Wish the best of returns and CAGR to everyone who has or will invest in the company. 
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India is a country of evolution and revolution seldom take place . Here things take time much then normal to evolve. Solar pump is also one such story in India which has been evolving over a decade. We all know the benefits of Solar pump and that it is a win -win situation for farmers, Central Government, State Government, Discoms etc but the theme is yet to play out.
Another such theme was Ethanol for which we had been hearing rosy story for decades. People had invested in Praj Industries 8 to 10 years back but the Ethanol story did not played well, until recent. The present government had made structural policy changes which has made the Etahnol manufacturing viable on a long term basis and is also extending all out support to Sugar Industry for implementation of the same. This is very evident from the CAPEX announcement by almost all Sugar Company and also healthy order book of Praj Industries. However even when the story was not playing out, Praj Industry was consistently working on the technological development and research on Ethanol. The Companyhad went under an extended period of underperformance, however now the inflection point has come and Praj Industries being a leader we can see substantial improvement in its performance and order books. Also in its stock price which has almost increased 5 to 6 times from its lows in 2020.
Shakti pump had also hinged its hope on solar pump. The Company had been focused for the last 8 to 10 years in the Solar pumping segment and and had been consistently working on technology, product, marketing & distribution channel , liasioning with government and other authorities. Is there any Company which had such a focused attention on this Solar Pumping Segemnt.
On the Government side whether it is Central or State, we know that the traction is positive and the pilot projects had also been successful in various states. States like Maharashtra have come with their independent Solar pump project apart from KUSUM.( MUKHYAMANTRI SAUR KRUSHI PUMP YOJANA Mukhyamantri Saur Krushi Pump Yojana :: Maharashtra State Electricity Distribution Company Limited :: – MahaVitaran)
I agree that the estimated figures given by the promoters are very rosy and optimistic but I can recall that the management had reiterated many times during the Concal that the figures estimated by the Company are subjected to performance of KUSUM scheme.
If the KUSUM scheme does not evolve as per expectation then defenitely it will not be possible for the Company to achieve targetted sales. But similar to Ethnol, the Solar pump story has to play sooner or later. The opportunity size under KUSUM i.e replacement of more than 3 million pumps is astronomical and even if a fraction of it gets implemented (last year implementation was only around 70000 pumps), the Company being the leader will certainly be the largest beneficiary of the scheme.
The PM-KUSUM scheme, like many government schemes, is certainly well-intentioned, but it will fall short of its ambitious targets for 2024.However, if it does that even a couple of years behind schedule, it will be a huge achievement, capable of changing the energy dynamics of Indian agriculture completely and permanently.
The new investors should be wary of the past performances of the Company, however old investors can also take a look afresh keeping biasedness apart. The Company has not grown as per projections of management however the trajectory is zig -zag and in upward direction(Rs 167 Cr in 2012 to Rs 930 Cr in 2021).
The management in their concluding remarks of concal declared about the dividend policy of the Company and its good to hear from a small cap Company. The Company will be distributing 20% of its profit as dividend to the Share holders.
Disclusre : Invested and views are biased.
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Shakti Pumps management interview (from 10:40 min)
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Hi
I have gained a lot of insights by studying the thread, and I try not to be too biased about past track records e.g., when the govt. spending was delayed. I am quoting some old posts to renew the focus on a more holistic perspective Vs a one-dimensional analysis!
Indeed in the Q3 FY21 concall they had mentioned Maharashtra orders as a big part; now we know why. Thanks!
They also mentioned how the KUSUM portal has to be set up by each state, and some like Punjab and some others, maybe Himachal, are not ready yet.
Also, full payment is released at the time work order is issued in KUSUM, so it is upfront. They refuse to work with states whose payment policies they do not like.
Electric pumps have the issue that agricultral electricity is very cheap or unmetered (depends on state); hence, DISCOMs have an issue with their finances. DISCOMs have only a very rough estimate of the electricity supplied and subsidies etc. Farmers get off-peak supplies at night mostly. And it strains the distribution network. The Maharashtra project mentioned is purely for off-grid consumers only (sponsored by DISCOM!).
Diesel subsidies and usage blend in with the whole ethanol epic very well. 
Kudos, this covers all points very well!
Disc: invested
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Why Solar pumps would be beneficial for State Government and Discoms
The Punjab government pays around Rs 6,000 crore power subsidy bill to Punjab State Power Corporation Limited (PSPCL) every year under its ‘free power scheme’ to the farming sector.
In Punjab, the consumption per tubewell, having motors mostly with power rating between 7.5 and 12 HP (horse power), is 8,000-9,000 units. So the annual power bill will come to around Rs 46,000 to Rs 48,000, and farmers are required to pay a bill of Rs 4,000 per month.
Electricity bill arrears for Agriculture in Maharashtra in Oct 2020 was $s 42017 Cr.
The power subsidy bills in the four southern States and Punjab are at least ₹33,000 crore, an amount the State governments will struggle to meet due to resource crunch in the light of the COVID-19 pandemic.
Annual State government subsidies amount to Rs. 115,500 crores to as the sum of power subsidies (Rs. 90,000 crores, 2015/16), irrigation subsidies (Rs. 17,500 crores,2013/14), and crop insurance subsidies (Rs, 6500 crores, 2018/19). Electricity consumption in Indian agriculture is far
greater than in any comparable large country. The fertilizer subsidy is the major Central subsidy while
the power subsidy accounts for most of the expenditures from the states.In 1979/80, the number of electrified pumpsets was a little less than 4
million. By 2017/18, the number had jumped to more than 21 million.The share
of agriculture in electricity supply was negligible in the early 1970s. By 2017, agriculture consumed 20% of all electricity supply.
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Promoters holding remains unchanged at 54.66% in Mar 2021 qtr
FII/FPI have increased holdings from 0.3% to 0.6% in Mar 2021 qtr.
Number of FII/FPI investors increased from 8 to 17 in Mar 2021 qtr.
Institutional Investors have increased holdings from 2.7% to 3.0% in Mar 2021 qtr.
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Petroleum Conservation Research Association
Ministry of Petroleum & Natural Gas, Government of India
http://www.pcra.org/pages/display/245-Technical-Papers
I was scanning for major Solar pump players in Indian market. Got this undated list of Submersible Pump (Water Filled type) prices discovered and vendors selected through EESL tender under Component B of PM-KUSUM Scheme
https://mnre.gov.in/img/documents/uploads/file_s-1584619769470.pdf
As per the list the major players are:
Solex : Solar power player
Shakti : Pump manufacturer with focus on Solar pumps
Sungrace : Solar power player
Rotomag : Pump manufacturer with focus on Solar pumps and Annual sales in the range of Rs 300 Cr
Topsun: Solar energy player
VRG Energy : Solar energy player
Ethos : Solar energy player
Premier: Majorly into Vaccum Pumps
Span : Manufacturing of Pumps and focused for Solar Pumps.
(Annual sales in the range of Rs 200 Cr)
Himalyan: Solar power player.
Apart from this I had also scaned for KSB, Kirloskar,WPIL and Roto pump through their annual report but did not find any focus for solar pumps.
Basic Components of Solar Pump are:
- Solar Panel
- Solar Pump and Motors.
- Controllers
- Structures on which solar panels are mounted.
Except Shakti and Rotomag, others mentioned in the list are simply assemblers and do not manufacture any thing. Rotomag manufacture Pumps, however Shakti is the only player which manufactures all the major components for Solar pump except Solar panel.
Rotomag financials are good and it seems to be the only respectable competitor.
Players which do not have any manufacturing facilities for Pumps will ultimately have to rely on pump manufactures likes Shakti, Rotomag , Kirloskar, KSB etc
Other members please advise if they have any idea of other major players.
[
Prices discovered and vendors selected for 10 HP … - mnre.gov
](https://mnre.gov.in/img/documents/uploads/file_s-1588908860169.pdf)
Even for 10 HP tenders approved vendors are:
Tata Power ,Shakti Pumps, Premier Energies, Span Pumps, Junna Solar and Solex Energy.
In this vendors also Shakti is the only Pump manufacturer and rest others are only assemblers.
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KUSUM is a big opportunity and has definitely taken a long time as per the news article and any investor in Shakti Pumps will have to bear that in his mind. May be because of this uncertainty, I do not see serious players for this segment and it may turn out to be a blessing in disguise.
KUSUM is a potential mega opportunity and it is an un deniable fact.
I was going through the interview of KSB management to assess how other pump manufacturers are looking into this opportunity, however it surprised me that there was no discussion on this issue.
It can be concluded that other pump manufacturing companies are either not prepared or not willing to participate in this opportunity in a focused manner which may turn out to be positive for player like Shakti.
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Anyone have any thoughts on Shakti Pumps board meeting for fundraising of 1000 crores? Balancesheet size is 670 cr and it is going to borrow 1000 crores. I know that their working capital cycle is very long, so they will need money for exponential growth coming in, but 1000 crores, it’s too much to take in?
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These are generally enabling resolutions and it means that the existing and proposed debt of the Company can be raised up to Rs 1000 Cr. The Company can borrow up to this amount over a period of time as per its requirement.
It doesn’t means that Company will borrow the entire amount immediately after passing of resolution.
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FII share holding has increased from 0.60% to 2.64% in this quarter
Shareholding Pattern
Numbers in percentages
| Sep 2018 | Dec 2018 | Mar 2019 | Jun 2019 | Sep 2019 | Dec 2019 | Mar 2020 | Jun 2020 | Sep 2020 | Dec 2020 | Mar 2021 | Jun 2021 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Promoters + | 47.95 | 48.25 | 48.25 | 48.25 | 48.31 | 48.84 | 49.14 | 53.64 | 54.21 | 54.66 | 54.66 | 54.66 |
| FIIs - | 0.07 | 0.03 | 0.03 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.30 | 0.60 | 2.64 |
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FII entered only from Dec 20 with a very small position. Near thee percent stake in June 20 shows their increased confidence in the business prospects of Shakti pumps
Disc: invested
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The Company on many occassions has discussed about International solar alliance project on Solar Pump.
This may also turn out to be a potentially very good opportunity for the company in future
https://isolaralliance.org/work/scaling-solar-application-agricultural-use
Shakti pump is also one of the potential bidder:
A totalFive(5) bidderssubmitted the bids in electronic procurement
portalwithin the bid submission deadline of 12th Sep, 2019, 1530 hours
IST.The names of the bidders are shown in thefollowing table.
Sr.
No.
Bidder’s Name
1 M/s Refex Energy Ltd.
2 M/s Grundfos Pumps (I) Ltd.
3 M/s Shakti Pumps (I) Ltd.
4 M/s Rotomag Motors & Controls Pvt. Ltd.
5 M/s Premier Solar Systems Pvt. Ltd.
These projects have a very long gestation period however once implemented they give large orders.
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Good results were not at all expected for the current quarter as management had already indicated in its CONCAL and interviews that due to COVID there had been restrictions on movement in rural areas. The first quarter was badly effected by COVID and lock down were imposed almost in every part of India.
Also KUSUM tenders have not yet been finalized and my bet on Shakti Pump story mainly hinges on KUSUM.
I have been holding it for last 3 years and I have seen worst quarters, negative surprise however for me was on EBDITA margin.
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Management discusses the delay in KUSUM because of legal matters which are expected to be resolved before the end of august. Then the growth is expected to be back on track.
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Disc: Invested
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