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Pennar Industries Ltd.: Experts' corner
513228 PENIND Group (B) BSE data
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Management speaks
Nrupender Rao
Nrupender Rao
Executive Chairman
Pennar Industries Ltd.
November 22, 2010, 6:47 pm
Why should an investor buy your company's stock?

The company’s top line and bottom line have been growing on a continuous basis every year over the past 5-6 years. From a pure commodity player, Pennar has transformed itself into value-added and engineering products company catering to niche customers.

Pennar Industries is a multi‐location, multi‐product company with the infrastructure to design and manufacture profiles and components in various grades of steel and stainless steel. The company manufactures products for following segments:

 

  • Engineering – profiles for light and heavy commercial vehicles and pressed products for the white goods industry.
  • Heavy engineering – components for rail wagons and coaches, including under-frame assemblies, side walls, end walls, roofs etc.
  • Infrastructure – building products like purlins, roofing sheets, deck plates etc; metal crash barriers like beams and posts for road safety; ESP electrodes for controlling pollution in the cement and mineral industries.

 

The company has a subsidiary -- Pennar Engineered Building Systems Limited -- that makes pre-engineered energy-efficient and cost-effective buildings for factories, warehouses, stadiums etc.

 

The company has set a target of achieving on a consolidated basis sales of Rs 1,300 crores in FY 11 and Rs 2,000 crore top line by FY15 with healthy profit margins.

 

The company has very  low long-term debt  (Rs 4 crore by March 2011), which gives it enough financial muscle to grow organically and also inorganically through the acquisition of small to medium engineering companies that produce engineered products for the power, nuclear and defence segments.

 

The company has dedicated and trained manpower whose average span of service with the company is around 15 years. The attrition rate is negligible.

What events do you expect in your industry sector over the next few months? Are these hurdles or catalysts?

With the growth story of India intact and expected GDP of 8.5%, we expect opportunities for all manufacturing industries to grow exponentially.

Companies are expected to grow inorganically by acquiring small and medium sized companies.

The company does not envisage any hurdle except for the availability of trained manpower. Pennar is taking steps to overcome this by imparting training to its employees to multi-task and increased automation and also by inducting fresh talent.

What growth initiatives has your company planned?

The company believes that there will be heavy demand for sophisticated fabrication facilities and specialised welding in the years to come. Hence our focus will be on enhancing our capacity in to handle products that need heavy fabrication and welding.

The increase in disposable income in the hands of young Indians will spur growth in the auto and white goods industries. We intend to increase our capacity to service these segments. Modernization of railways and the expected demand in infrastructure in the years to come are the other growth drivers that will propel our growth, as we supply profiles and components for railway wagons and coaches.

The above are in line with our strategy to emerge as a leading engineering company producing value-added products with higher profit margin.

Who is your competition? What differentiates you from them?

The company manufactures products catering to various segments. We do not have any direct competition in the sense that no single business entity in India manufactures all the products we do. We have competition in the various segments we operate, with various companies in the medium sector.

Our strengths are the manufacturing knowledge accumulated by hiring trained and loyal manpower over the last 35 years, the ability to produce precisely engineered products, delighted customer base and in-house capability to design and produce precision tools and dies for our manufacturing requirements.

How do you see your company performing over the next financial year?

On a consolidated basis, the company expects to achieve a turnover of more than Rs 1,250 crore in FY 11, a growth rate of over 40%. We expect the profit also to increase by 45-50%.

The EPS on a consolidated basis for FY 11 is also expected to show growth of 50%.