>TECPRO SYSTEMS LIMITED

Promoted by Mr. Ajay Kumar Bishnoi and Mr. Amul Gabrani in 1990, Tecpro Systems Ltd. (TSL) is engaged in providing turnkey solutions in material handling, ash handling, balance of thermal power plant (BoP) and pollution control system. From a modest beginning as an equipment suppliers, TSL has gradually progressed to providing complete material handling solutions. Over the years, it has developed extensive in-house mechanical, electrical, civil design and engineering capabilities with an established track record of executing turnkey projects in the power, steel and cement industries. It has successfully created an in-house design and engineering team consisting of 300 engineers and experienced project management team which gives it control of the entire process, from conceptualization to commissioning of a project. Its business activities are broadly classified into the following four segments:


■ Material Handling Solutions (50%): This is the flagship business of TSL where it undertakes turnkey projects of material handling systems for power, cement, steel, ports, coal and aggregate process plants for mineral processes. These projects involve design, engineering, manufacturing, supply, erection and commissioning of material handling systems, associated structural and civil work, electrical and instrumentation work and auxiliaries like dust control, suppression systems, ventilation systems and fire fighting systems. It specializes in creating systems that can be stationary, mobile or semi-mobile with typical capacity upto 300 tonnes per hour (TPH). TSL offers several types of conveyor systems like troughed, flat belt, pipe, screw, drag chain or salt chain conveyors and belt conveying systems for handling of bulk material from fine material like cement, lime powder to rocky materials like iron ore and limestone to cement and fertilizer bags and difficult materials like bauxite, clay, lignite and bagasse. Till date, TSL has executed over 1000 material handling projects on turnkey basis and has over 200 projects in hand to be executed.


■ Ash Handling (40%): TSL forayed into ash handling solutions pursuant to the merger of
Tecpro Ashtech Limited, which has been engaged in the business of ash handling systems for over 40 years and has provided turnkey ash handling solutions in several thermal power projects. Ash handling in the power, cement or steel plants is extremely critical considering the environmental impact of the ash spillage and storage and disposal. Hence TSL utilizes different ash handling technologies including pneumatic conveying, slurry and pumping of ash in liquid state or solid conveying through conveyors. It has expertise in creating Bottom Ash System, Fly Ash System, Coarse Ash System, Ash Slurry Disposal System etc which includes water pumping facility, compressed air facility, electrical power distribution system, PLC based controls and instrumentation system, civil and structural works. Till date, TSL has executed over 75 ash handling projects on a turnkey basis and has over 30 projects in hand to be executed.


■ BOP & EPC (10%): Leveraging its project management track record in material handling and ash handling solutions, TSL of late has ventured into the EPC business and started taking BoP contracts for coal-based thermal power plants and liquid fuel handling. It has executed contracts on turnkey basis, which include coal handling solutions, ash handling solutions, setting up of cooling towers, switchyard and plant electrical, water treatment plants and other auxiliary civil constructions. It either enters into collaborations or outsource to a third party supplier for providing BTG packages. Its EPC business is focused on providing integrated turnkey solutions for small power plants based on Indian or imported coal, washery rejects and biomass as main fuel. TSL received the first EPC order in 2007 whereas the first BoP order it got was in August 2009.


 Other Business: TSL through its various subsidiaries also has presence in other areas like supply of air pollution control equipment, waste processing, waste water treatment & waste heat recovery. It provides turnkey solutions for management and processing of municipal solid waste that can be used as either land fill or for generation of fuel, which is used as an alternative fuel for burning in kilns in the cement industry or in boilers. In August 2011, it acquired 100% stake in Ambika Projects, a Chennai based company engaged in the business of water & waste water treatment with presence in Chennai, Mumbai and Sultanate of Oman.


TSL has four manufacturing facilities in India, of which, three are at Bhiwadi, Rajasthan, and one at Bawal, Haryana. It manufactures stackers, reclaimers, crushers, screens, feeders and fabricated structures at its factory in Bawal, Haryana. The first unit at Bhiwadi, Rajasthan has facilities for manufacturing pulleys, idlers & rollers, structures, feeders, screens, conveyor systems, conveyor components, crushers and screen parts whereas the second unit has a casting division. The third unit manufactures ash handling equipments. For sales and marketing it has a pan-India presence with its head office in Chennai and design, engineering & marketing offices at Gurgaon, Chennai, Kolkata, Mumbai, Hyderabad, Pune, Ahmedabad and Bangalore. Through its subsidiaries in Dubai and Singapore and marketing office in Johannesburg, South Africa, it caters to the needs of Middle East, South-East Asia and African markets. Importantly, TSL has eight foreign collaborations for various material handling equipment and technologies and three collaborations in relation to ash handling operations. In July 2011, it entered into an agreement with US-based Advanced Conveyor Technologies to get technical support for design, distribution and installation of overland conveyor projects. Earlier, it had entered into two new technology tie-ups one with Pneuplan Oy of Finland for projects involving pneumatic conveying for fly ash and another with Nanjing Triumph of China in the waste heat recovery segment. Within a short time of this collaboration for waste heat recovery, TSL bagged two orders from Ultra Tech and one order from Shree Cement aggregating Rs.224 crore. Waste heat recovery is a relatively new concept to the Indian cement industry, wherein the exhaust gases produced during production of cement are used as fuel to produce power. This is a high potential business as power is being generated by using waste gas thereby saving cost of power. TSL is confident of bagging many more orders in this space in the near future as there are only a few players. 


During 2010-11, TSL strengthened its foothold to become one of the leading players in the BoP space. It won two prestigious orders from APGENCO aggregating to about Rs.1,978 crore for Rayalaseema Thermal Power Project Stage IV (1x600 MW) and Kakatiya Thermal Power Project Stage II (1x600 MW). In addition, it was awarded an order by Kohinoor Power for design, engineering, project management & supply of a 66 MW power plant in Jamshedpur. Ironically, TSL normally bids for only those projects where BTG has already been ordered, environmental clearances obtained, land & coal linkages achieved and financial closure done. This ensures that these orders are more likely to get executed within the planned timelines. As of December 2011, TSL has a robust unexecuted order book position of Rs.4600 crore, which is 2.5 times its FY11 turnover, thereby providing strong revenue visibility for the next 4-6 quarters. In the first three quarters of FY12, it won fresh orders to the tune of Rs.1600 crore. The order book comprises 58% for Material Handling division, 34% towards BOP and the rest 8% is for Ash Handling division.


Going forward, TSL intends to move towards providing more value-added engineering services and improving the manufacturing and project execution capabilities. It intends to foray into the supply and commissioning of water treatment plants, coal washeries, port handling operations and other projects in the infrastructure sector. In order to acquire technical expertise in these new ventures, it is looking to enter into technical collaborations or strategic tie-ups with international companies with advanced manufacturing technologies or acquire existing companies with such technical expertise. On the other hand it has formulated a simple strategy to participate in large projects in the BoP & EPC space under consortium bidding and jointly execute projects to build a versatile track record. The size of the opportunity in the Balance of Plant segment of power plant is huge. It is expected to attract investments worth Rs.1.6 trillion over the next five years. Such growth is expected primarily from coal based capacity addition during the next five years. Recently in the Budget 2012, government has decided to provide some tax benefits to power sector and proposed to scrap customs duty on imported coal and a concessional CVD of 1% to steam coal for a period of two years till 31 March 2014. This step is estimated to bring down electricity generation cost by 12 paise per unit. Also, an improving economic scenario, continued government focus on infrastructure investment and pick-up in private capex augurs well for companies providing material handling solutions for the core industries. Further, the company intends to set up 100% subsidiary in Indonesia to tap opportunities available in the bulk material handling and mining sector there. 


On the financial front, TSL registered 40% jump in revenue to Rs.1430 crore whereas PAT grew by modest 10% to Rs.29 crore for the nine month ending December 2011. Given the nature of business and accounting practices adopted, TSL recognizes majority of the revenue & profits during the last quarter of the financial year. Hence it is expected to end the current fiscal with a topline of Rs.2500 crore with PAT of Rs.150 crore i.e. an EPS of Rs.30 on its current equity of Rs.50.50 crore. Although TSL has debt:equity ratio of little over 1, debtors outstanding of 200 days and negative cash flow from operating activities, it is normal for a growing company in EPC space. At the current market cap of Rs.800 crore, it is trading grossly cheap at a P/E multiple of 5 times. Investors are strongly recommended to buy the stock current levels and add more on declines. At a reasonable P/E multiple of 8 times, its share price has the potential to move up to Rs.240 within a year. Long-term investors can expect much higher returns.
RISH TRADER