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The Anup Engineering Ltd - Can it scale up?

About the company
The Anup Engineering Limited (Anup) was incorporated in 1962 and is part of the Arvind group of Ahmedabad. The company was demerged from Arvind Ltd and listed as a separate entity in March, 2019. The company is engaged in the business of design and fabrication of process equipment which mainly includes heat exchangers, pressure vessels, centrifuges, columns/towers and small reactors that find applications in refineries, petrochemicals, chemicals, pharmaceuticals, fertilizers and other allied industries. Heat exchangers contributed 80 – 90% of the sales while remaining was contributed through sales of pressure vessels, centrifuges, columns/towers and small reactors.

About the product
Heat exchangers are used to transfer heat or cooling from one liquid to another. Key industries served – oil & gas refineries, petrochemicals, fertilizers, chemicals, pharmaceuticals, food and other allied industries. The company has technical collaboration with Lummus Technology for special High Efficiency Heat Exchangers (Helixchanger).

(source: Anup Presentation)

About the industry
Heat exchanger is a USD 21 billion industry globally – used to increase efficiencies. Largest players in the industry include: - Alfa Laval (>30% market share), Kelvion (Germany), Hisaka (Japan), SPX Flow/APV (US), SWEP (US). High profitability margins with many companies reporting gross margins of more than 45%. Alfa Laval has EBITDA margins of 14 – 15% while its Indian subsidiary also has EBITDA margins of 19%.
This is something which Credit Suisse prepared forx capital goods industry (was made for Alfa Laval):

Transformation Journey of the company
Despite being in the engineering segment since 1962, the company was not able to scale the business. However, the transformation of the company started when its current CEO – Mr. Rishi Roop Kapoor joined the company in 2010. Mr. Kapoor has pretty good reputation in the engineering industry and is an IIT Roorkee pass out. Prior to joining Anup, he was associated with Godrej and Boyce for more than a decade. The company has become a net cash company during the past few years and generates healthy cash flows.
Key financials of the company:


Some of the measures taken to turn around the company include:

  • Increasing market reach with increasing exports: Over the years, the company has increased focus on export markets to reduce cyclicality associated with domestic markets.

  • Empanelment with large EPC players: Despite its relatively smaller size, the company has been able to empanel itself with large global MNC EPC players and customers including Lurgi, Linde, Jacobs, Mitsubishi etc. The company has executed large projects for companies including Dangote Refinery (one of the largest refineries in the world), Reliance, OMCs etc. The key client lists include:
    (source: Company presentation)

  • Improving designing and manufacturing capabilities – one of the rare companies with entire range of metal processing capabilities under one roof and excellent design capabilities

  • Increasing complexity and weight of the product manufactured: Over the years, the company has increased realization of the equipment manufactured by it as indicated in the graph below:

  • Sticking to deadlines and avoided paying liquidated damages - Gained confidence of customers leading to repeat buys - Liquidated damages are one of the biggest cost.

The company competes with pure play heat exchanger companies including Patel Airtemp and Tema India (unlisted company) as well as large capital goods companies inlcuding ISGEC and L&T. Have done a comparison on the margin profile of Tema and Patel with Anup. Companies like ISGEC and L&T have much diversified product profile and are not strictly comparable.

Anup has highest margins amongst its peers and even better than much larger and diversified player – One interesting thing to note is the healthy GM of pure play heat exchanger cos which is much more than many capital goods companies.

Way Forward

  • All time high order book of the company – 300 crore by end of FY19 – largely from domestic market (might impact margins as guided by the management in its maiden concall post Q4FY19 results)
  • Expanding capacities – Target to spend 150 crore in capex for brownfield capacity in Odhav, Ahmedabad and greenfield capacity at Kheda – 40 kms from Ahmedabad – to be funded through internal accruals
  • Looking for further technological tie ups to enhance capabilities
  • Targeting 1000 crore over then next 4 – 5 years

What is attractive about the company?

  • Large industry size globally – new orders expected from all round the globe to improve efficiencies and cleaner fuels from refineries – Euro VI and BS VI implementation. Furthermore, the government owned OMC’s refinery are operating at 105 - 110% capacity utilisation and given the domestic demand of petrol/diesel with growth rates of 10 - 14% every year, these companies are looking at big capex over the next few years to expand their capacities.
  • Valuation – 42 crore PAT reported in FY19 and market capitalisation of around 500 crore currently. Healthy growth expected in revenues and PAT in FY20.
  • Attractive industry dynamics with many players reporting attractive gross margins
  • Net cash balance sheet and healthy cash flows.
  • Good feedback received from the industry peers about the company and top management.

Key Risks

  • Lumpy business – less visibility of revenue beyond one year. Furthermore, revenue can remain volatile on quarterly basis based on dispatches and orders in hand.
  • Largely dependent on oil & gas & petrochemical segment
  • Peak margins given it reported EBITDA margins of 25% plus during FY19. However, some comfort can be derived from company’s track record of reporting margins in the range of 24 – 28% over the past 5 years.
  • Working capital intensive operations - Its working capital intensive business with working capital cycle remaining between 100 - 180 days. These will also depend on dispatches during the year end.
  • Loans and advances extended to Arvind Ltd, its parent: Anup has extended interest bearing loans & advances of Rs.40 crore as on March 31, 2019 to its parent. However, the same can be called back depending on Anup’s fund requirements as per management.

Key Financials:
Profit and loss & key ratios

Balance Sheet & Key Ratios

(Disclosure: Invested. This is not a recommendation and anyone contemplating buying or selling should do their own diligence or take advice of their financial advisor)

Q4FY19 Results.pdf (2.8 MB)
Anup Engineering_VP Presentation_2019_For Uploading.pptx (923.0 KB)
Information-Memorandum_The-Anup-Engineering-Limited.pdf (3.0 MB)


Dear Sir,
Great write up. Thanks for all.
Q. Why other company not get good editda? Is there any advantage of anup? And margin is good of anup can possible more competition can come in this industry ??

Thank you

Hi Amit,

I did some working on the peers and found that although the peers in heat exchanger industry (Tema India and Patel Airtemp) report healthy gross margin, the difference in EBiTDA margins for Anup and other comes on account of lower labour cost (may be due to automation) and stores and spares (may be due to more in-house work - am just guessing). The margins can also be higher on account of higher complexity of work done by the company. Although, difficult to talk about the sustainability of the margins but some comfort is derived from track record of 4 - 5 years of generating margins above 20%.


Thanks for initiating the thread.

What is the source of historical financials?

@ankitgupta Thanks for the note.

Some questions/observations:

  1. What is the real IP here? Doesn’t appear to be a patented product, and others such as ISGEC also have JVs with Hitachi/Titan.

  2. Sustainability of high margins
    a. low employee costs management has been cost conscious and does not expand team size even if they win large orders - they have approx 250 people on rolls, how do others compare on revenue/employee metric.
    b. Ability to selectively bid for highly profitable contracts - at present they have a capacity of around 160 units/pa, up to what scale can they grow without compromising margins

  3. Tailwinds - there appears to be adequate pipeline of capex projects by refiners/petchem/fertilizers/natural gas (see below links) and also replacement demand for heat exhangers which I understand have a ~4 year life. However, what is Anup’s right to win, apart from cost competitiveness? Clients are not sticky and tend to award to L1 bidder.

It would really help to speak to a procurement person at a refiner/petchem/fertilizer/natural gas company and understand their views on the major providers.

My sense is that we are looking at growth for a few years on a small base, after which the heat exchangers product line plateaus and they will need to offer more equipment/EPC which could dilute margins

Some links showing demand potential. What % of this could translate into Heat Exchangers spend?


Natural Gas


Disclosure: invested


Its available on Arvind’s website - The nos are not uploaded on many website since the de-merger happened recently onlyl.

Hi Rohan,

Thanks for digging out articles on capex in refinery segment.
On your questions,

  1. I think the main IP is the designing along with relationship with top EPC companies, Anup has built over the years. In addition, ISGEC and L&T are pretty diversified companies and being in the industry for over decades, dont really think that Anup’s technical capabilities will be superior to them. May be it can also be due to their single minded focus on the heat exchanger segment.
  2. One striking thing about the margins of Anup is that EBITDA margins have sustained about 22% plus for 5 years now. If it was for a one or two years, one would have doubted their sustainability. Although, one can still not be sure on the sustainability but 5 years is a pretty long time and does give some comfort. Dont have data on Tema’s employees but Patels Airtemp has 153 employees as on March 31, 2018 and reported 150 crore revenue in FY19.
    b. May be currently because of capacity constraints, they are picking and choosing orders. However, with new capacities coming up in Odhav (existing location) and new greenfield plant, they might bid for lower margin products as well.
  3. It will be great if you can share the source from where you go the data of 4 year life of Heat Exchanger? I think as per whatever research I have done, its mostly to do with design and technical capabilities and relationship with customers is what is helping them.
    Havent been able to speak to procurement person at refinery/petchem/fertilizer/natural gas company but competitors do talk highly about them. But talking to customers will be useful.
    If one listens to their maiden concall for Q4 results, they said that they can reach 1000 crore revenue in 4 - 5 years by tying up for 2 more technology partners. They highlighted that they need not enter into new segments for that.
    Dont have any link for how much of refinery capex is allocated to heat exchangers>
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I had attended the Q4FY19 concall of Anup Engineering. Some of the key points I noted in the concall:

• FY19 – closed on a strong note. Overall revenue grew by 10% excluding the trading income. EBITDA margins grew from 26% to 29% in FY19. Partly on account of higher export realisation. Lower PAT due to higher tax outgo.
• Revenue declined during Q4. Our quarterly revenue and margins depend on shipment and dispatches during the quarter. H2 revenues increased compared to H2 of last year. Q3 we saw a phenomenal performance. Q1 which is coming up is we can see relatively better nos. Order book continue to remain extremely strong – confirmed order book of 300 crore to be delivered in next 4 – 5 quarters. Significant jump in order book position. Very good market conditions.
• 1000 crore revenue – aggressive 30% growth in FY20. Pursue two prompt strategy – expanding facility at existing location, adding infrastructure. Also identified a greenfield location as a completely new plant which will augment our capacity. Secondly, adding technologies to augment our existing abilities.
• Current order book 300 crore – what is average order ticket size? How has it changed over the year? Which verticals contributed to the order book? Margins sustainance over the years? Average ticket size – direct result of the product mix that we have been pursuing over the past 5 – 6 years. Realisation – 1.64 crore per equipment. 50% improvement over last year. Sustainability of margins? Pretty confident about margins. Robust system going for orders. Evaluating the enquiries. Good team of professionals to analyse the complexities and integrities for order we received. Each order are made to order. During the pre-order only, pricing will take care of it. Confident about maintaining our margins. 300 crore – confident about 25% EBITDA margins for FY20 also.
• Reason for demand – Partly demand for BS VI regulations – stringent norms in developing countries. First round of clean fuel base. Happened in last decade and a half. Same wave is now hitting us. On a longer term we are expecting – Usd 150 billion invested in refineries. In the next year we have projections of USD 500 billion to be invested in the sector. Other sectors also doing well like fertilizer plants. Also in LNG seeing demand. Largest producer of coal in the world. Like to use coal in a cleaner manner. Lot of emphasis into coal gasification plant. Outlook for next 10 years is good.
• Capex of 150 crore – Revenue from the new plant? Capex for new facility at Kheda included in it. Similar asset turns that we are seeing here.
• Linde and Faxir merger – Market leaders for hydrogen plant – Linde – preferred vendors for them. Participating in global plants with them. Most complicated equipment – one of their structured vendors and partners. Faxir supplied in US and India. Merger will have a positive impact on us.
• Export as % of sales and how is it growing over the years? Export % tends to vary as far as we are concerned. Varying pretty significantly.
• Got export incentives which impacted margins? Can have positive impact like it had this year by 2 – 3%. Export orders are more profitable than domestic markets. Exports will be our focus going forward. In Fy20 - % of exports will be lower this year and that’s the reason margin can be lower to around 25% in Fy20.
• What gives confidence moving from 220 crore to 1000 crore in next 4 – 5 years? We had a very good rate of growth in past 5 years. Operating from same capacity and infrastructure. Primary reason – enhancing the product mix. One reason which has allowed us to show the growth despite adverse market conditions. Almost 85% of the orders we get is repeat orders. Best record in the industry for delivering on time is concerned. Improve manufacturing capability. Inspires confidence by customers to trust. Engineering skills enhanced. New dimensions. Have been able to reach out to MNC customers after thorough audit by them. Huge potential in the market. Significant infrastructure that we have planned in Kheda and we will be able to cater to export markets.
• Products that we have introduced in the next 4 – 5 years? How is the technology tie up shaping up? We have been able to enhance our product mix – more complicated technologies and exotic metals like titanium etc. technology tie up also playing a role. We had another technology partner – we have signed new agreement with that company. Also, have plans to tie up with another technology leader who is the leader. Technology tie up will remain high in our agenda and help us grow to 1000 crore.
• Order book break up of industry and how much time taken? 300 crore – 90% heat exchanger – 260 crore shell and tube heat exchange, some pressure vessels, reactors etc – Refineries and integrated petrochemical plants and fertilizers which are coming up.
• Order and execution cycle works for us? Cycle is not able to predict from taking bid to us to delivery. Manufacturing cycle for our kind of equipment varies from 30 days to 200 days depending on complexity etc. Able to cater to wide range of equipment. Order months materialization 30 to 60 days.
• New facility coming up in Kheda – shifting existing line from Odhav to Kheda? Kheda – on stream 12 to 18 months. Facility at Odhav will continue.
• Next year margins should be around 25% - export incentive benefit this year was around 2 – 3%.
• Working capital cycle – working capital cycle has improved FY18 to FY19 – Further improvement in working capital cycle? This nos to continue next year as well.
• Capacity expansion – potential revenue? Difficult to make projections. Make this facility as world class facility. Actual nos will depend on orders we receive.
• Oveall outlook for order book inflow – very positive. Concerned projects which have been announce. Very strong pipeline
• 300 crore order book – 15% is the export mix
• Client concentration – how many customers there? For the next year, 85% sale is domestic – fertlizers plants, refineries, petrochemical – coming with different EPC businesses cos like Technip etc. Do we work directly with customers or epc contractors? Work with both. Directly smaller projects, breakdown or replacement. Larger projects managed by EPC contractors.
• Metal consumed for the product. How do we manage metal price volatility? Strong way to analyse the orders. Confirmed quotations. Close orders in short time and book raw materials. Debtor and inventory cycle for orders? Within a year, the project getting executing, why such debtors and inventory? Cant look at past few years. Growth will lead to higher debtors and inventory. Forward nos please. Get advances against orders? No there are partly we get advances – 15 – 20% advances we get.
• Order inflow pipeline is quite strong – traction from domestic market or export market looking good. Current year is predominantly domestic. Order pipeline strong for export and domestic both.
• Capex for FY19 – 40 crore.
• De-growth in topline reason for it? In our business, it actually depends on customer requirements and their priorities. Better to compare H2 with last financial year, revenue have grown from 124 crore to 143 crore compared to last year. Expecting nos in Q1 compared to corresponding period.
• Employee cost increased by 30% - partly on account of new people we added. Cross functions as well. If we look at on % basis of topline, its much lower. Industry norms – 9 – 13% while in our case its 8 – 9%. It will stay at same level as % of revenue.
• Segment wise contribution from revenue changes every year.
• How much incremental capacity we can generate from Kheda expansion and capex in Odhav? Help us in reaching 1000 crore in next 4 – 5 years.
• Planned – 150 crore capex for next 3 years.
• Investment in refineries and fertilizer sector? Scope for us? Tremendous scope. Export and domestic both will grow. Starting of small and long way to go.
• Balance sheet – Loans and advances given to Arvind Ltd.


the heat exchanger average lifespan is a rough estimate someone from the company provided

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Q1FY20 results

Press release:

Ahmedabad, August 7, 2019: The Anup Engineering Limited (ANUP), announced its financial results for the First Quarter Ended June 30, 2019


Performance highlights:
In terms of results, we closed Q1, FY2019 on a strong note. Overall Revenues for the Quarter grew by 23%
and stood at INR 37.06 crores – excluding trading income.
Corresponding to above operating income, EBITDA margins expanded from 24% in FY18-19 to 33% in
FY19-20, and stood at INR12.17 crores for FY2019-20. Profit Before Tax stood at Rs.10.84 crore (+82 %).
Profit after Tax was INR 7.95 crores(+67%).
The Company continues to report robust cash generation resulting in a strengthened balance sheet position.
Anup’s order book had witnessed a healthy improvement of 94% YoY from Rs. 155 Cr as on 1.4.2018 to Rs. 300 Cr as on 1.4.2019 & this has been further strengthened by significant growth of Order Book in Hand in the current quarter. This has started order building for the Next Fiscal showing greater visibility ahead and is a result of Company’s innate strength in Project Execution.
Huge investments are underway in the Oil & Gas industry in India from public as well as private sector
companies over the next 5-7 years. Business growth in the near term (2-3 years) will also be supported by the introduction of new emission norms (BS-6) that would require modification/revamp of heat exchangers currently deployed in oil refineries.
The construction of First Bay at Kheda is progressing as per Schedule of Capital Expansion planned by the Company. Similarly, the Heavy Bay Extention at its Odhav Plant is progressing with good pace in line with the Schedule. This will help the company execute larger and more complex equipment orders.

The Anup Engineering Ltd.
Land Line No: 079 22872823

Did anyone get a chance to attend the AGM yesterday? Brief notes would be much appreciated.

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Thanks for the detailed post. ANUP is of interest considering past growth rates and margin levels.

CAPEX of 150 cr over 3 years to be funded through internal accruals - I couldn’t see this piece of info in the concall transcript. But assuming that is the way, retained earnings that is there as of 2019 AR march 31 is 66 crores. So probably subsequent years’ profits to be fully reinvested correct?

Also some concern on funding would be loans given to arvind (44 cr - interest note not mentioned couldn’t find in AR) but at the same time borrowings made for 7 cr wc at 9 to 9.3 %.emphasized text

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From AR, the interest they get from Inter corporate deposits is 8.8% where-as, as you pointed out they availed the loan at 9 to 9.3%

While this looks illogical, one needs to ask the management on why would they do this.

Also I couldn’t fine more details on what the 35cr intangible asset, which is marked under license is and 10% of this got amortized (look for details under Note 6 : Intangible asset in AR). Does anyone know ?. Wonder from whom they got license, is it for the technology from a partner ?. If so, Anup may need to renew the license by paying such high sum in future again !!

And this, for which I couldn’t find any information at all,

Disclosure: Not invested.


Heat exchangers and pressure vessels are generally designed for 20 to 25 years by reputed companies.

I read in the concall transcript that nature of many of the orders are highly customized with unique requirements. The design of some of this is not-inhouse and possibly licensed from tech partners. Hope this clarifies to some extent.


The biggest overhang for the company is ICDs. I Am in losses in this company due to this. I hope management realise that the valuations can become richer if they truly demerge Anup with parent.

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i believe they intend to use the ICD for capex

Gaurav, Anup has given loans and advances to Arvind despite having the need of money for capex. Rather than providing ICDs, the company could have kept money with itself rather than lending at 8%