Background :
- The company was incorporated in the year 1979 as Karunanidhi Investments & Trading Company Limited. In the year 2002 it changed its name to Ramsarup Engineering Industries Limited and subsequently to Ramsarup Industries Limited (Ramsarup) on March 30, 2005.
- Ramsarup manufactures Steel Wires, TMT Bars and Rods. These products are primarily used in the power, housing and infrastructure sector. The main customers for its steel wires include Power Grid Corporation of India Ltd., L & T, Kalpataru Transmission & Power Ltd, KEC Ltd. and Apar Industries. For TMT bars, leading customers are L & T, Gammon India, Reliance Energy and HCC. The Company is a large supplier to various State Electricity Boards.
- Ramsarup is having three operating units viz. Ramsarup Industrial Corporation (RIC) at Nadia in West Bengal, Ramsarup Bars & Rods (RBR) at Shyamnagar in West Bengal and Ramsarup Vidyut (RV) at Dhule in Maharashtra.
- RIC is one of the leading manufacturers of black and galvanized steel wires in the country with an annual production capacity of 1,73,000 tonnes. RBR, engaged in manufacturing wire rods, steel wires and TMT bars, has an installed capacity of 87,000 tonnes of TMT bars and 24,000 tonnes of steel wires. While RV has been set up, in March 2005, to generate 3.57 MW of power through windmill.
- Modernization cum expansion of the existing manufacturing facility of TMT Bars at Shyamnagar.
- Setting up of a Structural Mill with an installed capacity of 135000 TPA at Shyamnagar.
- Enhancing the Long Term Working Capital requirements of the Company.
- General Corporate Purposes including strategic initiatives and acquisitions.
- Repayment of Unsecured Loan.
- Meeting the Expenses of the issue.
- The Company is a leading and a broad based producer of steel wires and TMT Bars in the country. The Company has been producing steel wires for over three decades following stringent quality norms. The industry being capital intensive by nature is an inherent entry barrier for new entrants.
- Ramsarup has risen from a start up to amongst the leading brands and is now an established player. Ramsarup has one of the largest capacities in India and is the only manufacturer to provide the whole range of TMT products under Thermax technology. Further the company is one of the largest steel wire producers in India after TISCO. This gives the company a competitive edge over its competitors.
- The customers of the company are in the power, housing and infrastructure sector. These are the sectors that are gaining currency in the present scenario and getting an impetus from the government. Measuring the importance of these sectors, it is apparent that Ramsarup has immense growth prospects.
- Return on net worth of the company is 17.5% for March 2005, which is higher than the industry return on net worth i.e. 12.5%. This indicates that company has earned high profits during the year.
- State Electricity Boards (SEBs) constitute a significant part of the outstanding debt of the company. SEB's are known to have a bad fiscal condition and any default may cause serious damage to the financial well being of the company.
- Operating Profit Margin (OPM) of the company is 4.96% for March 2005, which is lower than the industry OPM i.e. 7.14%. This indicates that company has high operating expenses during the year.
- Companies of Promoter group of Ramsarup have incurred losses in the last three years. This could hamper the organic growth of the company.
- Ramsarup has taken loan from banks for the expansion project. There are restrictive covenants in the loan agreement. These covenants can confine the company from declaration and payment of dividend, expenditure in new projects, transfer/change in the key managerial personnel, change in the constitutional documents etc. Failure of the company to comply with any loan conditions may hamper progress of the expansion project.
- Revenue of the company increased at the CAGR of 56% in the four years. In the year 2002 the value of revenue was Rs.230.91 crore and in the year 2005 it is Rs. 877.54 crore. Total expenditure of the company increased at the CAGR of 55% from Rs. 221.00 crore in 2002 to Rs. 837.25 crore in 2005.
- Interest expenditure of the company increased at the CAGR of 37% from Rs. 5.11 crore in 2002 to Rs. 13.20 crore in 2005. Profit After Tax of the company has increased at the CAGR of 75% from Rs. 2.54 crore in 2002 to Rs. 13.67 crore in 2005. The net profit margin of the company has improved in the last four years from 1.10 % to 1.56%.
- Return on Net Worth of the company, for the year 2005, is 17.5% where as in the year 2004 it was 15.6%. NAV of the company stands at Rs.73.06 as on September 2005.
- Annualized post issue EPS is Rs.15. The shares are offered at the price of Rs.60. PE Multiple of the company is 4.04 where as the PE Multiple of the Industry is 8.58.