Current price 249.60

Sector Steel

No of shares 31526750

52 week high 253.00

52 week low 85.05

BSE Sensex 28516.59

Nifty 8660.30

Average Volume 18981

BSE Code 530804

NSE Symbol TIIL

Technocraft Industries India Ltd.

Recommendation

– BUY/HOLD

Date – 07/04/2015

Company Overview

Technocraft Industries was established in 1972 by two IITian brothers - Mr. Sharad Kumar Saraf and Mr.

Sudarshan Kumar Saraf. Within a few years, the company started exporting to the Middle East, US and

Europe and developed its marketing and warehousing presence in these countries which acted as the front

end for its clients. Technocraft continued developing and increasing its production until it became the world's

second largest supplier of drum closures with a market share of .35%. Subsequently, the company ventured in

other businesses of steel tubes (now scaffoldings), textiles and IT. The company's manufacturing facilities are

located at Murbad (Thane), just 50 kms from JNPT port, which makes the operations efficient as over 90% of

the company's revenue is generated from overseas markets.

Technocraft Industries India Ltd (TIIL; a diversified player with interests in drum closures, scaffoldings, yarn

and garments) Thanks to its dominant presence in the existing markets and efforts to penetrate newer

markets, the company has been able to report a steady growth in its high-margin cash cow business of drum

closures. Drum closures contributed almost 50% of its operating profit in the last fiscal. The revenues from the

business are set to grow at 8-10% annually with an OPM of close to 35%. While the drum closure business is

the cash cow, the scaffolding & formwork (S&F) business, has emerged as the key growth driver for the

company. Till now, the company was focused on the overseas markets for the S&F business and was catering

to the needs of the oil & gas and other corporate clients globally. However, TIIL has also started witnessing a

growing demand for S&F among the domestic users especially the infrastructure sector. Thus, the business

segment is likely to grow at 22-25% annually for the next couple of years.

In order to de-risk its steel drum closure business and cater to rise in demand for plastics, TIIL has venturedinto manufacturing of plastic closures for small metal and plastic containers majorly used in the Oil & Gasindustry. In order to increase its presence in the Plastic Closures segment, TIIL is even looking to acquiresome companies in this space. The current market capitalisation stands at Rs 766.10 crore.

Category No. of Shares Percentage

Promoters 23,636,562 74.97

General Public 4,557,743 14.46

Other

Companies1,862,640 5.91

Foreign

Institutions737,957 2.34

Foreign - OCB 385,575 1.22

NBFC and

Mutual Funds249,910 0.79

Foreign - NRI 96,363 0.31

Market Cap (Rs Cr) – 775.56

Company P/E (x) – 10.48

Industry P/E (x) – 8.04

Book Value (Rs) – 170.88

Price / BV (x) – 1.44

Dividend (%) – 50 %

EPS (TTM) – 23.47

Dividend Yield (%) – 2.03

Face Value (Rs) – 10

Share Holding Pattern Financial Details

Industry Overview

The steel sector in India is almost a century old, and exhibits significant economic importance due to rising

demand by sectors such as infrastructure, real estate, and automobiles, in domestic as well as international

markets. The level of per capita consumption of steel is an important determinant of the socio-economic

development of the country.

India is the fourth largest producer of crude steel and the largest producer of soft iron in the world. Presently,

the Indian steel industry employs around 500,000 people while the per capita consumption in 2013 stood at

around 57.8 kilograms. However, these figures are expected to rise with increased industrialization throughout

the country. An improvement in overall business sentiment, the government's announcements on big-ticket

investment in infrastructure and a post-monsoon pick-up in demand led India to post the fastest growth in steel

production globally in October. At 8.5 per cent, India's pace of growth was also the fastest among the major

steel producing countries.

The Indian steel sector enjoys advantages of domestic availability of raw materials and cheap labour. Iron ore

is also available in abundant quantities, though the recent mining restrictions have put a strain on its

availability. This abundance has been providing a major cost advantage to the domestic steel industry.

The centre is aiming at rejuvenating the steel sector and removing the hurdles in steel production by scaling

up production to 300 MT by 2025 from the 81 MT in 2013-14, India is poised to move to second position in

steel production in the next 10 years. The demand for steel in India is expected to rise by 4-5 per cent this

year and will touch a compounded annual growth rate (CAGR) of 15 per cent after FY17. Given the

government's high focus on jump starting stalled projects, followed by pushing large flagship projects,

including the freight and industrial corridors, it is expected that India will begin moving back on the path of

materials intensive growth by the end of this year.

Balance Sheet

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Sources Of Funds

Total Share Capital 31.53 31.53 31.53 31.53 31.53

Equity Share Capital 31.53 31.53 31.53 31.53 31.53

Reserves 507.20 445.86 392.58 375.52 349.66

Networth 538.73 477.39 424.11 407.05 381.19

Secured Loans 88.58 67.20 83.54 106.53 60.57

Unsecured Loans 20.98 21.58 0.00 50.00 70.00

Total Debt 109.56 88.78 83.54 156.53 130.57

Total Liabilities 648.29 566.17 507.65 563.58 511.76

Application Of Funds

Gross Block 377.35 368.16 362.34 356.79 280.79

Less: Revaluation Reserves 0.00 0.00 0.00 2.57 2.74

Less: Accum. Depreciation 273.69 256.60 231.26 206.40 170.92

Net Block 103.66 111.56 131.08 147.82 107.13

Capital Work in Progress 0.33 0.15 1.70 2.93 51.82

Investments 158.04 164.00 57.60 82.09 72.56

Inventories 123.52 104.49 91.57 144.16 85.68

Sundry Debtors 221.62 175.15 136.52 104.11 100.48

Cash and Bank Balance 34.21 12.39 10.57 0.23 1.80

Total Current Assets 379.35 292.03 238.66 248.50 187.96

Loans and Advances 100.26 66.83 140.91 153.11 162.16

Fixed Deposits 0.00 0.00 0.00 62.14 52.14

Total CA, Loans & Advances 479.61 358.86 379.57 463.75 402.26

Current Liabilities 69.01 56.60 55.09 35.16 34.67

Provisions 24.35 11.80 7.20 97.84 87.32

Total CL & Provisions 93.36 68.40 62.29 133.00 121.99

Net Current Assets 386.25 290.46 317.28 330.75 280.27

Total Assets 648.28 566.17 507.66 563.59 511.78

Contingent Liabilities 120.45 68.18 40.08 1.39 1.55

Book Value (Rs) 170.88 151.42 134.52 129.11 120.91

Profit and Loss Account

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Income

Sales Turnover 838.38 647.96 553.22 456.66 379.40

Net Sales 838.38 647.96 553.22 456.66 379.40

Other Income 28.17 21.93 19.75 28.97 26.39

Stock Adjustments -16.06 -4.13 -19.97 30.33 -2.37

Total Income 850.49 665.76 553.00 515.96 403.42

Expenditure

Raw Materials 512.23 361.36 343.09 306.60 224.15

Power & Fuel Cost 15.50 0.00 28.42 20.51 30.01

Employee Cost 39.19 33.58 33.69 25.58 22.89

Other Manufacturing Expenses 0.00 0.00 0.00 33.02 23.56

Selling and Admin Expenses 0.00 0.00 0.00 35.12 27.34

Miscellaneous Expenses 135.94 141.36 80.78 6.07 3.39

Total Expenses 702.86 536.30 485.98 426.90 331.34

Operating Profit 119.46 107.53 47.27 60.09 45.69

PBDIT 147.63 129.46 67.02 89.06 72.08

Interest 3.85 6.01 7.22 7.90 5.67

PBDT 143.78 123.45 59.80 81.16 66.41

Depreciation 23.07 27.65 30.42 36.37 21.52

Profit Before Tax 120.71 95.80 29.38 44.79 44.86

PBT (Post Extra-ord Items) 120.71 95.80 29.38 47.70 45.86

Tax 38.55 31.08 11.08 14.25 14.96

Reported Net Profit 82.16 64.73 18.30 32.35 29.78

Total Value Addition 190.63 174.94 142.89 120.30 107.19

Equity Dividend 15.76 9.46 3.15 3.15 4.73

Corporate Dividend Tax 2.68 1.58 0.51 0.52 0.80

Per share data (annualised)

Shares in issue (lakhs) 315.27 315.27 315.27 315.27 315.27

Earning Per Share (Rs) 26.06 20.53 5.81 10.26 9.45

Equity Dividend (%) 50.00 30.00 10.00 10.00 15.00

Book Value (Rs) 170.88 151.42 134.52 129.11 120.9

Dividend History

Index and Company Price Movement Comparison

Symbol Value Action

RSI(14) 56.939 Buy

STOCH(9,6) 42.202 Sell

STOCHRSI(14) 36.451 Sell

MACD(12,26) 16.080 Buy

ADX(14) 21.672 Buy

Williams %R -42.451 Buy

CCI(14) 38.8277 Neutral

ATR(14) 35.5086 High Volatility

Highs/Lows(14) 0.0000 Neutral

Ultimate Oscillator 46.551 Sell

ROC 9.437 Buy

Bull/Bear Power(13) 28.1940 Buy

Technical Indicators

PBIT – 11.12 v/s 11.92

RoCE – 19.21 v/s 17.98

RoE – 16.67 v/s 15.77

Net Profit Margin – 9.48 v/s 9.66

Return on net worth – 15.25 v/s 13.55

D/E Ratio – 0.20 v/s 0.19

Interest Cover – 32.39 v/s 16.95

Current Ratio – 1.70 v/s 1.67

Reserves – 507.20 cr v/s 445.86 cr

PAT – 82.16 cr v/s 64.73 cr

Total assets – 648.28 cr v/s 566.17 cr

Net sales – 850.49 cr v/s 665.76 cr

Book Value – 170.88 v/s 151.42

Days BSE NSE

30 228.45 228.43

50 225.59 225.61

150 199.39 199.54

200 194.38 194.49

Important Ratios (YoY) Simple Moving Average

Investment Rationalize

TIIL is the global leader among the drum closure manufacturers with market capital more than Rs.775 crore

and impressive CAGR of 17.2% in revenue in the last five years.

TIIL has designed and developed the next generation technology for manufacturing of drum closures. It also

manufactures all its gaskets and clamps and offers a full range of drum closure products to its clients. With

patented technology, there has been substantial reduction in manufacturing costs due easy availability of raw

materials and improvement in quality.

In view of the healthy economic growth and thrust on infrastructure development by the Government of

India, the tube industry in India is expected to grow at the rate of 7 to 8% p.a. The signs of improvement in

economic conditions in western countries will increase the demand particularly for scaffoldings as well as

other products.

Company is having a health financial position with impressive ratios and reserves of Rs.507.20 crore, which

will help the company in order to expand business or manufacturing facilities.

Improvement in economic condition will help the company to increase its revenue because most of

companies revenue comes from drum closures which is related with packaging business and scaffolding

revenue will increase with the improvement in real estate and construction sector.

Revenue from textiles, engineering, power transmission and distribution, windmill and IT business will add to

the profits of the company.

Company is able to achieve a positive cash flow of Rs.25.91 crore in FY14 compared with Rs.(-7.20) crore in

FY13 and is able to increase inventory turnover to 7.24(x) from 5.19(x).