>BALMER LAWRIE & COMPANY LIMITED (Hedge equities)

COMPANY PROFILE
Balmer Lawrie & Co Ltd is an Indian government owned entity that is managed under the guidance of The Ministry of Petroleum and Natural Gas. The company derives its name from two Scotsman (George Stephen Balmer and Alexander Lawrie) who established the firm under a partnership agreement in 1867 at Kolkata. In 1924, it then became a private company only to be converted into a public limited company in 1936. Having dabbled in a range of businesses (including tea, shipping and banking) during its formative years, it has consolidated operations over the years and is now known as a multi-product, multitechnology and multilocation conglomerate, with a strong network of local and global joint ventures and subsidiaries. The company has manufacturing facilities in Chennai, Kolkata, Mumbai, Mathura and Silvassa and international offices in U.K. and UA.E.

BUSINESS
This public sector behemoth offers a wide and diversified array of services, rendered under five broad segments namely Industrial Packaging, Logistics Infrastructure and Services, Travel and Tours, Greases and Lubricants and Others (Tea, Leather Chemicals and Refinery and Oil Field Services). Of these segments the biggest revenue growth driver is the Travel and Tours segment followed by the Logistics Infrastructure and Services sector.

Industrial Packaging: Thought this segment contributes less than 1/5th to the company’s overall revenue, it has garnered a huge reputation within industrial circles, and is considered to be the largest manufacturer of industrial package containers. The firm manufactures 165, 200 and 210 ml steel drums that are utilized for safe packing, transport and storage of goods. Utilizing its strong R&D facilities and 6 manufacturing units (Mumbai, Kolkata, Chennai, Panipat, Silvassa and Asaoti) it is able to provide a comprehensive series of drums to its diversified client base that ranges from food companies to chemical companies.

Logistics Infrastructure and Services: The Company has considerable experience in the logistics sector where its involvement dates back to the nineteenth century. It has the distinction of being the only major PSU to offer comprehensive logistic based services. The logistics segment of Balmer Lawrie is further sub-divided into the logistics infrastructure segment and logistics services segment. Under the logistics infrastructure segment, the firm offers warehousing and distributing services and maintains 3 stateof- the-art container freight stations (CFS). Due to its superior infrastructure it is able to offer value added services such as palletisation, shrink wrapping, labeling, re-bagging, repacking, sorting, inland transportation, supply chain intention is to serve as a one-stop shop for its customer’s EXIM needs. As part of its logistic services segment, the firm offers air freight services, ocean freight services, air chartering, ship chartering, express cargo movement and projects logistics management. This firm has a world-wide network in over 50 countries, managed by professionals in the logistics field and it will certainly prove to be a crucial contributor to the firm’s future prospects. Currently this segment contributes almost 24% to total revenue and this figure is expected to increase in the future.

Travel and Tours: Nearly 40% of the firm’s revenue comes from this segment and much of the company’s overall fortunes will depend on this sector. This segment of Balmer Lawrie had the unique distinction of handling the Commonwealth Youth games in 2008. The firm has a large base of IATA approved agents (1500) and over 15000 non IATA approved agents to help it service this largely fragmented industry. Revenues and profits from this firm have grown at a healthy rate over the last 5 years (Revenue CAGR of 17.1% and profit CAGR of 19% from 2005-2009) and this is mainly due to the company’s widespread network all over India.

Greases and Lubricants: This is another segment in which the company has a dominant position, being considered amongst the top 10 grease manufacturers in Asia and the largest in the country. In India 65% of the client base for grease and lubricants consists of automobile companies and the remaining 35% consists of industrial and marine companies. This unit generates sales by selling its flagship lubricant Balmerol and grease processing business and
manufacturing services for other companies.

Others (Tea, Leather Chemicals and Refinery and Oil Field Services): The other segment is the lowest contributor to the overall revenue. The tea business is one of the oldest and traditional businesses of Balmer Lawrie, but the firm has reduced its dependence on this sector. There have been suggestions that the company might do away with its tea business in the long run, but as it is a low contributor to revenue, one does not expect dramatic alterations to the firm’s overall prospects. However the company’s tea continues to be a popular product both domestically and abroad and the company is one of the largest suppliers of bulk and packet tea to Russia & CIS, West Asia and various North African countries. As part of its Leather chemicals business, the firm manufactures and markets performance chemicals for leather processing and is considered to be the market leader in fat liquors. The leather industry is essentially an export oriented industry and this segment’s performance is dependent on the performance of the export sector in general. The refinery and oil field segment provides mechanized tank and lagoon cleaning services and vapour loss prevention measures for various oil refining companies. Because these services are essentially specialized, the firm has been able to establish long standing associations with various refinery companies.

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