19 Jul 2010, E.T
Gujarat Reclaim & Rubber Products (GRRP) is likely to see an increase in demand for its recycled rubber with natural and synthetic rubber prices soaring. Being the industry leader, its expansion plans are likely to offer great growth opportunities as acceptance of recycled material increases. Considering its attractive valuations, stable financials and growth prospects, long-term investors can consider this stock.
Business: Established in 1974, GRRP is into processing and reclaiming rubber from scrap of tyres and its components or other rubber products for different applications in both tyre and non-tyre rubber products. Nearly two-thirds of its sales go to tyre manufacturers. It has plants at Ankleshwar, Panoli and Solapur with a total capacity of 45,000 tonnes with full capacity utilisation.
GRRP supplies to leading tyre manufacturers such as Ceat, MRF, Apollo Tyres, JK Tyre and Bridgestone. More than half of its revenues come from exports. The company has also set up a power plant in Ankleshwar for captive consumption. The reclaimed rubber industry in India is a mix of 125 small and medium-scale manufacturers.
Growth drivers: At a time when natural rubber prices are ruling at their all time high, the demand for reclaimed rubber is on rise. The company is not only expanding capacities, but also plans to raise prices gradually.
In December 2009, the company added 6,000 tonne capacity at its Panoli plant, full benefits of which will be available in FY11. The company also has plans to expand its existing plants apart from setting up new units in strategic locations. The company is currently in the process of tying up Rs 63 crore loan to fund these expansions, which could come up over the next couple of years.
The price of reclaimed rubber stagnated at around Rs 35 per kg in the past two years after steadily rising in the last decade. With sharp rise in natural rubber prices, the demand for reclaimed rubber is likely to increase enabling the producers to increase the prices.
In the past three years, the proportion of reclaimed rubber in tyres has gone up from 3% to 5%, which is expected to increase to 10% within five years.
Financial: The first nine months of FY10 were stagnant for the company, but the fourth quarter registered a sharp 58% jump in net sales with a 54% jump in profits. The lower base effect and additional capacity at Panoli plant were the key reasons behind the spurt. In the past 5 years, the net sales of the company grew at a CAGR of 25.5% while the net profit grew at 26.2%.
The company has a healthy track record of generating cash flows and paying dividends. In the past three years, the company has consistently brought down the debt-equity ratio to below 0.45 as on March 2010. The company’s return on capital employed has averaged at around 40% in the past five years.
Valuations: At the current market price the stock is trading at a P/E of 8.6. The company is expected to generate earnings per share of Rs 125 for FY11, which translates in a one year forward P/E of 6.9. Low liquidity, however, remains a key concern as the scrip had an average daily traded volume of 480 shares in the past one month.
Sunday, July 18, 2010
Tuesday, July 13, 2010
Small units to get more bank funds
MUMBAI:Micro, Small and Medium Enterprises (MSMEs) will soon have access to adequate funds with the initiative taken by the central government to increase the credit availability to the sector.
Speaking at a seminar organized by the Maharashtra Pradesh Congress Committee (MPCC) here on Tuesday, Union Finance Minister Pranab Mukherjee said the government was trying to remove obstacles in the growth path of the MSMEs.
“The Prime Minister's task force on MSME has submitted its report in January and has recommended an agenda for immediate action to cover all areas including credit, marketing, labour, technology, skill development and taxation. The Prime Minister's Council on MSME will now be regularly monitoring the implementation of the recommendations,'' he said.
It is estimated that in terms of value, the MSME sector accounts for about 45 per cent of the manufacturing output and around 40 per cent of the total exports of the country.
It employs an estimated 60 million people spread over 26 million registered and unregistered enterprises. There are 1.5 million registered units, out of which 95 per cent are micro enterprises and about 4.7 per cent are small enterprises.
However, unlike larger companies, the MSME sector does not have access to alternative avenues of raising capital, “despite its commendable contribution to the gross domestic product (GDP), exports and employment,'' he said.
The Finance Minister pointed out that there were a host of problems relating to registration and credit rating which needed to be sorted out before successful listing. “There has been a general grudge that commercial banks mainly give priority to the corporate sector with better credit rating and provide credit at below prime lending rates.
But with the switch over to lending on the basis of base rate from July 1, their lending would be transparent and hopefully the small scale and medium size enterprises would get more banking funds at favourable rates.''
The Small Industries Development Bank of India (SIDBI) is the principal financial institution for the promotion, financing and development of industry in the small scale sector and to co-ordinate the functions of the institutions engaged in the promotion and financing or developing industry in the small scale sector. NABARD has also undertaken similar initiatives focusing on rural enterprises.
Non-availability of skilled manpower is one of the key hurdles faced by MSME units and Mr. Mukherjee said that to promote skill development, the Prime Minister's Council on National Skill Development laid down the core governing principles for operating strategies for skill development. The Council has a mission of creating 50 crore skilled persons by 2020 and the National Skill Development Corporation which started functioning in October 2009, has targeted creating 15 crore skilled manpower.
“As a political entity, we have a responsibility to create awareness in the small scale sector and MSMEs. They are not aware of the facilities available to them. We should create an awareness campaign as the entire paradigm of development has changed and inclusive growth to participative growth,'' said Mr. Mukherjee.
via:HINDU
Speaking at a seminar organized by the Maharashtra Pradesh Congress Committee (MPCC) here on Tuesday, Union Finance Minister Pranab Mukherjee said the government was trying to remove obstacles in the growth path of the MSMEs.
“The Prime Minister's task force on MSME has submitted its report in January and has recommended an agenda for immediate action to cover all areas including credit, marketing, labour, technology, skill development and taxation. The Prime Minister's Council on MSME will now be regularly monitoring the implementation of the recommendations,'' he said.
It is estimated that in terms of value, the MSME sector accounts for about 45 per cent of the manufacturing output and around 40 per cent of the total exports of the country.
It employs an estimated 60 million people spread over 26 million registered and unregistered enterprises. There are 1.5 million registered units, out of which 95 per cent are micro enterprises and about 4.7 per cent are small enterprises.
However, unlike larger companies, the MSME sector does not have access to alternative avenues of raising capital, “despite its commendable contribution to the gross domestic product (GDP), exports and employment,'' he said.
The Finance Minister pointed out that there were a host of problems relating to registration and credit rating which needed to be sorted out before successful listing. “There has been a general grudge that commercial banks mainly give priority to the corporate sector with better credit rating and provide credit at below prime lending rates.
But with the switch over to lending on the basis of base rate from July 1, their lending would be transparent and hopefully the small scale and medium size enterprises would get more banking funds at favourable rates.''
The Small Industries Development Bank of India (SIDBI) is the principal financial institution for the promotion, financing and development of industry in the small scale sector and to co-ordinate the functions of the institutions engaged in the promotion and financing or developing industry in the small scale sector. NABARD has also undertaken similar initiatives focusing on rural enterprises.
Non-availability of skilled manpower is one of the key hurdles faced by MSME units and Mr. Mukherjee said that to promote skill development, the Prime Minister's Council on National Skill Development laid down the core governing principles for operating strategies for skill development. The Council has a mission of creating 50 crore skilled persons by 2020 and the National Skill Development Corporation which started functioning in October 2009, has targeted creating 15 crore skilled manpower.
“As a political entity, we have a responsibility to create awareness in the small scale sector and MSMEs. They are not aware of the facilities available to them. We should create an awareness campaign as the entire paradigm of development has changed and inclusive growth to participative growth,'' said Mr. Mukherjee.
via:HINDU
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