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SVS Securities Private ate Ltd.
Volume No. II Issue No. 25 October 07, 2011
Tube Investments of India
Cycling its way to growth
Rs 132
Sensex: 16,233 Nifty: 4,888
FINANCIAL SUMMARY
SALES OPM OP OTHER PBIDT INTEREST PBDT DEP. PBT EO PBT TAXATION PAT EPS
(%) INC. BEFORE EO AFTER EO (RS)*
1203 (12P) 3591.08 11.6 417.77 2.24 420.01 67.48 352.53 76.27 276.26 0.00 276.26 88.09 188.17 10.1
1103 (12) 2981.10 11.4 339.43 10.79 350.22 60.42 289.80 69.10 220.70 -20.60 241.30 71.64 169.66 8.0
1003 (12) 2358.49 11.1 261.59 3.43 265.02 28.76 236.26 66.81 169.45 -39.95 129.50 48.29 81.21 6.5
0903 (12) 2073.36 5.2 108.59 15.08 123.67 28.19 95.48 59.12 36.36 46.66 83.02 10.84 72.18 1.4
* On current equity of Rs 37.17 crore; Face value Rs 2 each. EO: Extraordinary items. EPS is calculated after adjusting for EO and relevant tax. Figures in Rs crore. (P): Projections.
Source: Capitaline Corporate Databases
Tube Investments of India (TI) is the flagship Company of Murugappa Group. The company
has 15 manufacturing/assembly units spread across the country. These units are ably
supported by marketing offices that act as interface between customer requirements and
production team. Its product segments are - Engineering, Metal Formed Products, E-
Scooters, Fitness Equipments and Cycles. Recently, TI acquired a controlling stake in
Sedis Group, France.
Market leading position in many segments
TI is the market leader in precision tubes with 62% market share by virtue of its quality and
application engineering capabilities. It is the market leader in roll formed car doorframes
with 76% market share by virtue of its cost efficiency, association with key auto majors and
expertise in roll forming capabilities.
TI is a leading player in automotive chain with 35% market share by virtue of its quality,
cost and delivery and association with two wheeler majors.
The company is also a leading player in bicycle segment with 34% market share by virtue
of its brand equity, product development capability and proximity to the markets.
Flagship company of a strong South Indian Group
Founded in 1900, the Rs 17051 crores (USD 3.8 billion) Murugappa Group is one of
India’s leading business conglomerates. The Group has 29 businesses including seven
listed Companies actively traded in NSE & BSE. Headquartered in Chennai, the major
Companies of the Group include Carborundum Universal Ltd., Cholamandalam
Investment and Finance Company Ltd., Cholamandalam MS General Insurance Company
Ltd., Coromandel International Ltd., Coromandel Engineering Company Ltd., E.I.D.
Parry (India) Ltd., Parry Agro Industries Ltd., Tube Investments of India Ltd., and
Wendt (India) Ltd.
The Group is market leaders in served segments including Abrasives, Auto Components,
Cycles, Sugar, Farm Inputs, Fertilizers, Plantations, Construction, Bio-products and
Nutraceuticals. The Group has forged strong joint venture alliances with leading
international companies like Mitsui Sumitomo, Foskor, Cargill, Groupe Chimique Tunisien,
Winterthur Technology Group and Morgan Crucible. The Group has a wide geographical
presence panning 13 states in India and 5 continents.
Renowned brands like BSA, Hercules, Ballmaster, Ajax, Parry’s, Gromor and Paramfos are
from the Murugappa stable. The organization fosters an environment of professionalism
and has a workforce of over 32,000 employees.
STOCK DATA
BSE Code : 504973
BSE Group : B
NSE Symbol : TUBEINVEST
Reuters : TUBE.BO
Bloomberg : TI IN
Par Value(Rs) : Rs 2
52-week High/Low : Rs 170 / Rs 116
Sector : Miscellaneous
SHAREHOLDING PATTERN*
Category
% of equity
Total Foreign : 10.94
Total Institutions : 14.85
Total Govt Holding : 0.00
Total Non Promoter
Corporate Holding : 6.88
Total Promoters : 48.24
Total Public & Others : 19.1
Totals : 100
* as on 30 th June 2011
Source: Capitaline Databases

SVS Securities Private Ltd.
Cycles/Components/E Scooters
TI businesses are divided into Cycles/Components/E Scooters, Engineering and
Metal forming
The Bicycles/Components/Electric scooters division of the company comprises of
bicycles of the standard and special variety including alloy bikes and specialty
performance bikes, bicycle components sold as spares, fitness equipment (motorised
tread mills, elliptical, recumbent bikes etc.) and Electric scooters.
In FY 2011 this segment accounted for 36% of total sales of the company.
The bicycles volume for the quarter was in line with that of the corresponding period of
last year. Demand fell sharply in April and May but it has picked up since then. Forty
retail outlets under the various formats have been added during the quarter. Retailing
of bicycles and fitness products continue to provide customers a good buying
experience and service that are contemporary and 25% of the bicycle segment revenue
is derived through this channel. The division grew significantly in the premium segment.
With its continued thrust in the Rural Retail format it opened 30 stores during the
quarter taking the tally to 100.
With respect to Electric Scooters the focus was on improving the performance of key
components such as batteries with a view to enhancing distance per charge and reducing
charging time. Though sale of electric scooters was lower during the quarter as compared
to the corresponding quarter of the previous year, consumer interest for these products
is increasing and the subsidies announced by the Government are making them
attractive. It is expected that the performance will be better going forward.
The size of the nascent Indian Electric scooters industry was estimated at about
40,000 scooters in 2010-11 as against 60,000 scooters in the previous year. There
has been a significant consolidation in the industry with a number of regional players/
importers vacating their position due to their inability to meet the exacting quality
and service requirements of the customer. This has reduced the customers’ confidence
in product reliability, affecting overall industry penetration. By the close of 2010-11,
there were only three major national players left in this segment. It is expected that
the sustained focus of the national players on product quality and service coupled
with government support and rising fuel prices will improve the off-take of this
product in the years ahead.
The company strengthened its position in the industry through a number of timely
launches viz.
It introduced a bicycle with a carbon frame, for the first time in the country, designed
and manufactured at the company’s plant. These bikes, launched under the ‘Montra’
brand, were benchmarked with global performance bikes and positioned for the urban
health and fitness conscious segment.
It also introduced the ‘GT’ range of bicycles - an entry level bike in the premium segment.
It also introduced the ‘Mongoose’ range of bicycles in the BMX segment.
Engineering division
In FY 2011 Engineering division accounted for 39% of total sales of the company.
The Engineering division of the company comprises of cold rolled steel strips and
precision steel tubes viz., Cold Drawn Welded tubes (CDW), Electric Resistance Welded
tubes (ERW) and value-added tubular components. These products cater to the growing
requirements of the automotive, boiler, bicycles and general engineering industries.
For the second successive year in FY 2011, the Indian automotive industry reported
TI is the market leader in
precision tubes with 62%
market share by virtue of its
quality and application
engineering capabilities. It is
the market leader in roll
formed car doorframes with
76% market share by virtue
of its cost efficiency,
association with key auto
majors and expertise in roll
forming capabilities.
The Group has forged strong
joint venture alliances with
leading international
companies like Mitsui
Sumitomo, Foskor, Cargill,
Groupe Chimique Tunisien,
Winterthur Technology Group
and Morgan Crucible. The
Group has a wide
geographical presence
panning 13 states in India and
5 continents.
October 07, 2011
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SVS Securities Private Ltd.
high growth, despite high interest rates and rising prices due to increasing input costs.
All sectors of the industry performed creditably; the two wheeler segment grew 26%
and passenger cars by 30%. The company augmented its production capacity by
deploying equipment brought back from Tubular Precision Products (Suzhou) Co Ltd.,
China. Most industry players in the CDW segment are operating at full capacity; new
capacities are expected to be added in the foreseeable future.
The Cold Rolled Steel Strips segment is dominated by integrated steel manufacturers.
The company continues to be a niche player focusing on special grades, catering to
diverse applications in various sizes and grades. The company continues to lead this
segment in South India.
The export of tubes grew 15% largely catalyzed by robust growth coming out of Asia.
The company maintained its leadership position in the domestic value-added tubes
segment with a market share of around 48%. Sales of tubular components grew 40%
in volume terms, marking yet another year of the company’s performance as a reliable
and quality supplier of tubular components to the automobile industry.
Service levels to customers, a key thrust area, improved across all plants through
higher efficiency levels and better throughput. A new four-year wage settlement
with the employees’ Union was concluded in the mother plant, strengthening
productivity levels.
The company expects growth in engineering tubes division to be driven by tubular
components. The sales volume of tubular components grew by 40% to 7308 tonnes in
FY 2011. The company also plans to increase the share of revenue from non auto
segment in engineering division to 50% in five years from 21% in FY 2011.
Metal Formed Products
Automotive & industrial chains, fine blanked products, roll-formed car doorframes and
cold rolled formed sections for railway wagons & passenger coaches constitute the
company’s Metal Formed Products.
In FY 2011 Metal Formed Products division accounted for 25% of total sales of
the company.
In this segment, volumes of automotive chains increased by 24% and that of industrial
chains by 12%. Fine blanked components registered a 79% growth with the success of
all new product programmes undertaken during the last year. Export of industrial chains
grew by 33%. The products for the railway segment grew significantly registering a
137% growth in volumes. The doorframe segment volumes were flat on the back of a
low 9% growth in passenger vehicle sales.
The company enhanced capacity and productivity in addressing the growing automotive
chain requirements of Original Equipment Manufacturers and the replacement market.
TI is one of the three major players manufacturing roller chains in India. For the
second successive year, growth in the two-wheeler industry helped the company to
grow. The industrial chains segment too continued to grow in line with the country’s
industrial growth.
The Government of India intends to raise the share of goods transported by the Indian
Railways, catalyzing the demand for additional wagons. The company, another national
player and a few regional players cater to the growing demand.
The product range in the railway sections business was enhanced with the
commencement of the manufacture of wall and roof assemblies for passenger coaches.
The sales of metal forming grew by 34% to Rs 775.24 crore in FY 2011. The sales
volume growth in various metal forming divisions is 30% in automotive chains; 17% in
October 07, 2011
The Engineering division of
the company comprises of
cold rolled steel strips and
precision steel tubes viz.,
Cold Drawn Welded tubes
(CDW), Electric Resistance
Welded tubes (ERW) and
value-added tubular
components. These products
cater to the growing
requirements of the
automotive, boiler, bicycles
and general engineering
industries.
Founded in 1900, the Rs
17051 crores (USD 3.8
billion) Murugappa Group is
one of India’s leading
business conglomerates. The
Group has 29 businesses
including seven listed
Companies.
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SVS Securities Private Ltd.
door frames; 138% in fine blanked products; 37% in industrial chains and 60% in
exports. Its PBIT grew by 26% to Rs 101.59 crore.
Marketshare of the company in various segments are: around 50% in CDW segment of
precision welded tubes; 40% in automotive chains; around 60% in roll formed car
doorframes and around 50% in special bicycle segment
The segment-wise contribution to metal forming division is 62% from auto, 20% from
railways and 18% from non auto.
Q1 financial performance
For the quarter ended June 2011, standalone net sales increased 22% to Rs 874.26
crore. OPM improved from 11.5% to 11.7% which took OP up 25% to Rs 102.624
crore. Other income fell 79% to Rs 1.24 crore and interest cost grew 11% to Rs 15.48
crore. After providing for depreciation of Rs 18.31 crore (up 12%) PBT before EO grew
22% to Rs 70.07 crore. EO was NIL. Provision for tax grew 17% to Rs 20.05 crore after
which PAT increased 24% to Rs 50.02 crore.
Consolidated revenue for the quarter ended June 2011 was higher by 31% to Rs
1470.73 crore and the consolidated PBT before exceptional items for the quarter grew
by 33% yoy to Rs 104.73 crore. The EO for the quarter was an income of Rs 30 crore
(toward reversal of excess provision in subsidiary) compared to an expense of Rs 30
lakh (toward provision for diminution in value of investment) in the corresponding
previous period. Thus the PBT after EO was higher by 72% to Rs 134.73 crore and PAT
was higher by 70% to Rs 88.73 crore. And the net profit after minority interest was
higher by 61% to Rs 74.3 crore.
Financiere C 10, the Company’s overseas subsidiary manufacturing Industrial chains
achieved a turnover of Rs 53 crore (up 30% yoy) for the period Jan-March 2011 and its
PAT for the same period was Rs 1 crore. The figures of its are consolidated on one
quarter lag. The company expects double digit growth in turnover of Financiere C 10,
overseas chain subsidiary of the company, in CY 2011. The company caters to industries
such as car / escalator / textiles / food processing / packaging / cement / sugar / paper
/ water treatment / lumber / dams / amusement park. It has 5 global patents and leader
in special and engineering class chains.
Cholamandalam Investment & Finance Company Ltd, a subsidiary company in the
financial service business achieved a profit before tax of Rs 57 crore against a profit of
Rs 23 crore in the previous year.
Cholamandalam MS General Insurance Company Ltd. a general insurance subsidiary of
the Company registered a significant growth of 31% in Gross Written Premium during
the quarter and achieved a Profit before Tax of Rs. 6.7 crore, a growth of 35% over the
corresponding period.
Valuation
In FY 2012 we expect the company to register sales and net profit of Rs 3591.08
crore and Rs 188.17 crore respectively. On equity of Rs 37.17 crore and face value
of Rs 2 per share, EPS works out to Rs 10.1. The share price trades at Rs 132.
P/E works out to just 13.1
The Group is market leaders
in served segments including
Abrasives, Auto Components,
Cycles, Sugar, Farm Inputs,
Fertilizers, Plantations,
Construction, Bio-products
and Nutraceuticals.
A market leader in many
segments, the company will
continue to grow through
various strategic initiatives.
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SVS Securities Private Ltd.
TUBE INVESTMENTS OF INDIA: STANDALONE RESULTS
1106 (3) 1006 (3) VAR. (%) 1103 (12) 1003 (12) VAR. (%)
Sales 874.26 717.08 22 2981.1 2358.49 26
OPM (%) 11.7 11.5 11.4 11.1
OP 102.62 82.22 25 339.43 261.59 30
Other inc. 1.24 5.83 -79 10.79 3.43 215
PBIDT 103.86 88.05 18 350.22 265.02 32
Interest 15.48 13.99 11 60.42 28.76 110
PBDT 88.38 74.06 19 289.80 236.26 23
Dep. 18.31 16.41 12 69.10 66.81 3
PBT before EO 70.07 57.65 22 220.70 169.45 30
EO 0.00 0.00 — 20.60 -39.95 LP
PBT after EO 70.07 57.65 22 241.30 129.50 86
Taxation 20.05 17.18 17 71.64 48.29 48
PAT 50.02 40.47 24 169.66 81.21 109
EPS (Rs)* # # 8.0 6.5
* On current equity of Rs 37.17 crore; Face value Rs 2 each. EO: Extraordinary items. EPS is calculated after adjusting for EO and relevant tax. Figures in Rs crore. (P):
Projections. Source: Capitaline Corporate Databases
Disclaimer : This document has been prepared by SVS SECURITIES PVT LTD and Capital Market Publishers India Pvt. Ltd. (the company) and is being distributed in India by
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October 07, 2011
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