Dhanteras Pick- KIRLOSKAR ELECTRIC COMPANY LTD – Turnaround begins

Company Profile:

Kirloskar Electric Company Ltd. (KECL) established in 1946 is one of the leading Indian electrical engineering companies. It produces more than 70 products under eight product groups which cater to core economic sectors such as Power, Sugar, Steel, Cement, Agriculture, Oil & Gas, Refineries, Nuclear energy. It manufactures electric motors, alternators, generators, transformers, switchgear, DG sets etc.

KECL products are known for their high quality, durability and reliability. The company adhere to international standards by acquiring & adapting latest technologies along with in-house R&D.

What went wrong:

In 2008 KECL has amalgamated the business of Kirloskar Power Equipment Limited and Kaytee Switchgear Limited. At the same time they have also make acquisition of a German company LDW. This decision went wrong. There was a sudden rise in loans resulted fall in net profit in coming years and then it turned in loss.

	March 07	March 08	March 09	March 13	March 14	March 15	March 16
Sales	591	821	866	802	680	511	547
Loan	32	131	147	185	210	213	223
Interest	5	19	28	34	42	44	42
Depreciation	1	11	13	17	12	11	11
Net Profit	18	62	30	4	(-) 41	(-) 129	(-) 31

Turnaround Begins:

Company has started cleaning of balance sheet and written off investment in German subsidiary and obsolete items in 2015. Efforts of revival of the company are now yielding. It turned in to GREEN and from last three quarters it is showing a small net profit.

To come out from the problem it has raised funds by selling treasury shares worth of Rs.21 crores and QIP issue of around Rs.40 crores.

In 2014 Lender Banks have restructured the loan and as per restructuring plan company has transferred the non-core real estate to SPV which will dispose the real estate and pay back the bank loans.

The value of non-core real estate assets of the company is more than Rs.1000 crores.

Near Bengaluru airport it is having 100 acres unused land. Company is in process to repay the all bank’s loans by selling non-core real estate and will become a debt free company in coming years.

Competitors of the company are trading around PE ratio of 30. After revival in future decent price appreciation is expected.

Disclaimer: This Blog, its owner, creator & contributor is neither a research analyst nor an Investment Adviser and this re-presentation is based on information available on various websites on internet. He is not responsible for any loss arising out of any information, post or opinion appearing on this blog. Investors are advised to do own due diligence and/or consult financial consultant before acting on any such information.