Elecon Engineering

 ELECON ENGINEERING

OVERVIEW

Elecon Engineering is engaged in delivering power transmission solutions and material handling equipment. The company caters to the needs of various sectors like steel, fertilizers, cement, coal, lignite, iron ore mines, power station and port mechanization in India.

INVESTMENT RATIONALE

· The company is in planning for CAPEX of Rs 45-50 Cr in FY 13 and has completed CAPEX of Rs 87 Cr during FY12 out of total budget of Rs 111 Cr. While remaining CAPEX of 24 Cr will be completed as routine CAPEX. Higher CAPEX will benefit the company in coming periods.

· The company is planning to raise funds  to repay high cost debt, to provide for capex requirement for the next 2-3 years and to make available funds for any good opportunity of acquisition. The company is also planning for acquisitions.

· After continuously declining for past 3 quarters, Elecon’s order book increased to Rs1520 Cr (May’12) with order book cover at 1.2X FY12 revenues .

·  This was on the back of strong orders worth Rs550 Cr secured in Apr-May’12 period and after low order inflows in Jul-Dec’12 period.

SECTOR OUTLOOK

The Planning Commission has projected that investment in infrastructure would almost double at US$ 1,025 billion in the Twelfth Five Year Plan (2012-17), compared to US$ 514 billion in the Eleventh Plan. Of the US$ 1,025 billion, 50 per cent is expected to come from the private sector, whose investment has been 36 per cent in the Eleventh Plan.  The government is also making  fast execution of Eastern and Western corridor which costs almost Rs 90000 Cr which will create a great opportunity for infrastructure companies.