I missed a point you can think of PI industries to replace kaveri seeds as growth in PI will be more robust.

A couple of factors that should impact MSS

1) joint venture between Johnson control and Yanfeng is a good competitor in interior business. This may affect revenues of MSS

2) slowdown in Brazil and China will again affect revenues of MSS

Disc :- I had shorted futures contract yesterday that has been settled today. Looking to buy (equity) if it corrects further. This is not a buy/sell recommendation. Please do your own due diligence

Following are some key points from the latest concall July 30, 2015 (for better understanding of Skipper as Business):

1) Going forward we also are in the process of setting up three more units of PVC pipes. The first one will be in Sikandrabad near Delhi, second one will be in Guwahati in North East and the third one will be in
Hyderabad, Telengana. (In my view, clearly indicates Nation-wide rolling of plans)

2) CPVC is a product that was missing from Skippers range for a long time primarily because we were
not finding the right partner for supplying us the raw materials for this product. As you might know,
CPVC is a product which is produced, the raw material is basically produced by only four global
manufacturers, one in America which is Lubrizol one in France which is Arkema and two in Japan
which are Sekisui and Kanika, so recently Skipper tied up with Sekisui for support of this raw
material and now Sekisui has started supplying the raw material to us and we are manufacturing the
pipes in India, which is the same model followed by Astral and Aashirvad with Lubrizol of US.
Interestingly Sekisui is the only other company apart form Lubrizol which is NSS certified so this is a
certification which is received by the company, this is a US certification and that carries a lot of
weight in the water segment. Because Lubrizol and Sekisui are the only two manufacturers of NSS
certified raw material our product also automatically becomes that much more respected in the
market. Now going forward with the addition of CPVC we will be looking to penetrate the plumbing
market in India in a big way. This is going to complete our basket of sorts which apart from CPVC
will also have UPVC and SWR pipes so now we will be able to bid for complete projects basically
which we were not able to earlier. On top of this the Wavin tie up that we have entered for
polybutylene pipes which we have also recently done that is the most advanced plumbing system
which is available in India right now, in fact in the world right now and Wavin has chosen us as its
partners in India and initially they are going to be supplying us this complete system from the UK
plant but the idea is that going forward will be manufacturing that in India itself under Wavin
licensing.

3) Polybutylene will probably not happen this year that will probably be part of the capex plan for next year.

4) Our order book is pretty much split 50-50 right now, 50% for exports and 50% for domestic and
where domestic ordering is concerned as of now almost we can say 90% of our domestic order are
from PGCIL. (In my view, there is too much dependency on one buyer- Power Grid Corporation)

5) We are qualified for the highest range possible in power grid. In fact in Power Grid Skipper is the
single largest tower supplier right now.

6) Our capacity utilization is 90% plus.

7) We require marginal capex because every year we increase capacity by about 20% in our T and D
division and so that’s doesn’t require much capex because most of the fixed infrastructure is already
available with us. Approximately between 20 to 25 Crores.

8) Because typically the order inflows generally happen in Q3 and Q4, Q1 and Q2 in fact we are just
happy to maintain the order book level even then the company has secured approximately 150 Crores
of new order from export market even in Q1 which is generally not seen in regular Q1 and Q2.

9) Yes, we have already started delivering on export order which is in fact, this year we should see
significant, export being a significant part of the top line, last year was only below 15% but this year
we expect at least 30% to 35% top line coming from export business, definitely share of export
revenue is going up and in terms of the order, you asked about the cycle of the order I mean how long
the order is….

10) The delivery period typically for export order is between two to two-and-a-half some of our orders are
already in the second year one which we have recently secured they will be delivered over the next
three years.

11) PVC as I mentioned earlier we have already commissioned a new plant in Ahmedabad with a capacity
of 10,000 tonnes which will augment the existing capacity of 12000 in Kolkata and we expect that
with further three new plants which we are adding in this financial year our capacity will be close to
about 40,000 tonnes by the end of this financial year; this is in line with our target to reach One Lakh
Tonnes by FY’18.

12) Typically what happens in the infrastructure project, all infrastructure projects including transmission
project they see a reduced activities during the monsoon month so from April onwards basically
project contractor starts reducing their inventory at site which is why the offtake becomes very low in
Q1 and Q2 but towards the end of Q2 really the requirement, the push starts coming from the project
site for the material, so typically that is what happens every year but even if you compare the quarter
numbers to quarter of last year there is a significant improvement.

13) You also need to account for the fact that PVC as a product has a lower working capital cycle also as
compared to our T & D products, so while this might happen to some extent wherein our engineering
product business commands an EBITDA of more than 15% and this might look at somewhere around
13% -14% but because of lower interest impact, we will definitely see the pact being maintained and
bettered going forward.

14) In a consolidated basis the company is growing at, the plans to grow at more than 20% to 25% every
year and while there is absolutely no dearth of orders in the T&D business the PVC business with its
rapid expansion on a pan-India level we do not see really any major obstacles in getting the numbers
that we are looking at.

15) Yes, in fact the company is very conscious about increasing debt so for our expansion plans over the
next two to three years we do not envisage adding to the long term debt of the company at all. So
really whatever debt we have will be in line with the existing debt repayment schedule, so we are not
looking to add any kind of debt for future expansion.

16) Yes, as I mentioned approximately 50%, 1200 Crores is from export business and another 1200
Crores odd is from domestic business, out of which you can assume 1000 Crore plus from PGCIL.

17) We also export certain portion to Europe as well as Africa and also Nepal so those countries also form
part of our export order book. Of course the lion’s share goes to South America and approximately
you can assume it to be an even split between the three countries as of now, so I would say between
30% and 35% for all three countries.

18) So the monopole capacity which is expected to be commissioned in Q2 of this year, the initial starting
capacity will be somewhere around 15000 tonnes for being a engineer fabricated product the capacity
can vary slightly but then tentatively around 15000 tonnes will be added to our overall capacity of
175000 tonnes of T&D capacity and we are at discussions with many of these utilities and they have
shown keen interest in this, so we expect good response for it once the unit comes up. The products are already across being used in various utilities in the transmission side as well as in the telecom
side. That market is already there.

19) PGCIL follows a policy that whatever projects they win on in the TBCB route those projects they
split the contract between supply and construction, so if you look at a Lakh Crores in total the total
basket approximately 40,000 Crores is expected to come upon TBCB route. Now in that going by the
past trend PGCIL has been securing 50% of all contracts that have been there in the TBCB and also
some of the private developers like Sterlite and Essel even they sometime adopt the policy of towers
purchases separately and construction separate. If I assume 75% of the TBCB route business to be
split up with tower separate and construction separate then perhaps 40,000 Crores 75% we can look at
30,000 Crore of transmission business to be coming up on this split model basis.

20) No in fact we have witnessed that due to flat demand for the last couple of years we have seen
actually lot of non serious players going out of business, so competition scenario as of now I would
say less competitive than what it was may be perhaps two year ago.

21) So the new units which are coming up in Sikandrabad which is UP that would have a capacity of
roughly around 8000 tones per annum to start off with in phase one. The Guwahati unit we are
looking at a capacity of about 4000 tonnes per annum and the Hyderabad unit in Telengana that is
going to come up with a capacity of about 6000 to 8000 tonnes also. The idea is to reach capacity of
about 40,000 tonnes by the year end and as you can imagine in the PVC industry adding on capacity
is not very difficult because all you need to do is add extrusion line, so these are the first phase
capacities that we are looking at and then going forward we would start augmenting further capacities
in these units as and when required. In fact in all probability we will be able to commission all three of them or at least two out of them in Q2 and the other last one within Q3.

I hope above points will provide some understanding of Company's business and give base to dig more about the Company.

Hi,

This stock came under my radar a few days ago and started reading about it. I was about to start a thread on the same so thank you @hssodhi198 for taking this initiative.

Now coming to the company, I have a few points to add:
1. In the power transmission sector, the line of work is as follows:

a) PGCIL or one of the state discoms come up with a tender for a line which is generally an EPC project. The tender is on L1 basis after come technical requirements are fulfilled. This company is new to the EPC part of the business although they have been the suppliers for a long time. So for them to expand in this space they need to get sufficient experience to participate in tenders. Some companies generally take the JV route if they are not qualified, so we need to know how is the management planning to do this.

b) The EPC business is a very slow process with many extensions and delays in payments from the discoms. This is effect the working capital of the company if they plan to expand further in this space.

1. General procedure for finalizing a tower for full fledged manufacturing consists of a on ground test where in the actual tower is made and forces are applied on the tower to know if it can withstand the loads. I donot what capacities are present with this company. This is also the area where companies like KEC have an advantage i.e. they have manufacturing, testing as well as EPC business and they have been running for a very long time. So if we are bullish on electrification of India why not invest in market leaders, where the scope of additional capex is also limited.

2. The segment of PVC pipes for water and angle sections for power transmission are totally unrelated. What is the rationale for selecting this combination of businesses?

3. To whom does the company currently sell their power transmission sections to? I have had a rough go through the annual report but couldnt find any names. If information is present on this please share.

Cheers!!

Disc: I do not hold any stocks of this company. Currently tracking it closely.