>KSB PUMPS LIMITED (GEPL)

OVERVIEW

Success stories are always especially nice to hear when they start repeating themselves. KSB was first recommended (VOL No 27, Dt 24/11/08) at the then price of Rs 186 and was once again repeated (VOL No 40, Dt 09/03/09) with a price target of Rs 310 in a years time. The stock is trading far above the targeted price and in view of an expected good outlook ahead (as this is especially true of orders from countries that are continuing to push ahead with important
infrastructure projects despite financial constraints), we are taking the liberty this week to repeat the recommendation. Along with China, India is one of the mega markets of the future. The pumps & valve industry has grown in line with the economic growth of the country. This has not surprised many, since the pumps industry is only expected to grow, driven by the demand from the capital goods, energy, mining, gas & oil sector. Valves may be a small component in the
production process, but they perform a vital function and thus have to be extremely reliable. This is particularly true in diary, beverage, food, petrochemicals and gas industry. KSB Pumps Limited (KSB) is a well established player in the pump & valve manufacturing industry.

INVESTMENT RATIONALE
Along with energy, water is one vital variable in the complicated equation called "the world’s future”. The growth in the world’s population and the progressive industrialization of many emerging markets is leading to a rising demand for clean water. Thus the market for water engineering is growing in line with the demand for water. The waste water disposal also requires a enormous use of pumps. KSB provides a range of pumps & valves for obtaining, treating and supplying water. Municipal waste disposal facilities need to build new sewage treatment plants
and modernize the existing ones. The idea of desalination of sea water is expected to catch up very fast in the country and KSB as a group is well equipped and has a special product range to offer for this segment of the business. Transporting water over long distance is also catching up and this favors the large pipeline pumps & valves business of the company.

The focus of the Indian economy to increase the energy generation capacity is positive for KSB as it is the leading supplier of power plant pumps for the energy sector. Natural gas as an energy source is also gaining importance and this source of energy shall play a dominant role in the Indian economy in the future because of the abundant findings of gas. Transportation of liquefied gas in compressed form requires special valves and these are manufactured by the KSB group. The demand for industrial goods is likely to remain strong in the coming years too owing to capacity expansions across the board. The growth areas could be chemicals & process engineering and waste & clean water management industries, as their utilities will increasingly rely on large scale water treatment plant. Efficient waste water treatment is vital to the community and has the largest growth potential in the future and KSB is all set to capitalize on the anticipated huge demand from this industry.

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