ICRA Credit Perspective

The Indure Private Limited

Analyst Contacts:
Sabyasachi Majumdar sabyasachi@icraindia.com +91-124-4545304 Avneet Kaur avneetk@icraindia.com +91-124-4545319

Rating
ICRA has reaffirmed the rating assigned to the fund based limits/long term loans of The Indure Private Limited (Indure) at LBBB (pronounced as L Triple B) for an enhanced amount of Rs. 188.70 crore. ICRA has also reaffirmed the rating assigned to non fund based limits of The Indure private Limited at A3+ (pronounced as A three plus) for an enhanced amount of Rs 1184.24 crore. The outlook has been revised from stable to positive. (Refer Annexure for Rating History)

Relationship Contact:
Vivek Mathur
vivek@icraindia.com

Key Financial Indicators

Operating income (OI) OPBDIT PAT Equity Capital Net Worth OPBDIT/OI PAT/Operating Income PBIT/(Total Debt + Deferred Tax Liability + Net Worth) OPBDIT/Interest & Finance Charges Net Cash Accruals/Total Debt Total Debt/Net Worth Total Debt/(Net Worth + Deferred Tax Liability) Current Ratio NWC/OI FY2007 426.4 16.3 4.3 2.4 20.1 3.8% 1.0% 18.0% 2.38 10.9% 2.86 2.89 1.01 1.7% FY2008 642.7 33.7 13.5 4.0 34.4 5.2% 2.1% 30.9% 2.20 18.2% 2.51 2.55 1.04 5.7% FY2009 727.1 59.4 21.9 4.8 56.3 8.2% 3.0% 51.6% 2.09 38.0% 1.13 1.13 1.08 -0.3% FY2010 730.8 65.4 27.8 4.8 83.2 8.9% 3.8% 48.0% 2.55 54.8% 0.69 0.68 1.10 -3.1%

+91-124-4545310

April 2011

(%) (%) Times (%) Times Times Times (%)

OPBDIT: Operating Profit before Depreciation, Interest and Tax; PAT: Profit
after Tax; PBIT: Profit before Interest and Tax Note: Amounts in Rs. crore

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ICRA Credit Perspective

The Indure Private Limited

Credit Strengths
Established position in the Ash Handling Systems for more than three decades, with the company being one of the leading players in terms of the number of systems installed. Diversification into EPC of power plants is expected to add significantly to revenue growth. During FY11, the company has also diversified into coal handling plants (CHP). Strong parentage as the Desein group is one of the leading consultancy in the domestic power sector since the last 42 years with a global presence, having executed more than 29,000 MW capacity of Coal/Lignite/Diesel/Gas based combined cycle plants. Huge potential for thermal power projects development in India offers significant growth opportunity. Healthy order book position of Rs 3402 crore as on 15th March 2011. Although the topline has remained stable, slight improvement in operating/net margins and cash accruals backed by increased order book and economies of scale. Improvement in accretions and liquidity augur well for the capital structure of the company, with the gearing declining from 1.13 times to 0.69 times as on March 31, 10. Expected equity infusion by 3i to the tune of Rs 150 crore in Indure, expected to augur well for the capital structure and liquidity position of the company.

Credit Concerns
Slowdown in power sector reforms could adversely impact the revenue and profitability. Strong competitive pressures, especially in the EPC business, going forward. Most contracts are of fixed price nature which exposes the company to movement in raw material prices.

Rating Rationale
The ratings factor in Indures established position and long track record in imple mentation of ash handling systems and balance of plant (BOP) systems for thermal power plants which coupled with technical and cost competitiveness has resulted in a strong and reputed client base. This coupled with the buoyant outlook for thermal power generation projects has resulted in a healthy order book position which in turn would result in a sustenance of the current strong revenue and profit trends. The ratings also derive support from the improvement in gearing, which declined from 1.13 times as on March 31,2009 to 0.69 times as on March 31, 2010 as well as satisfactory liquidity as measured by adequate unutilized bank limits. The ratings are however constrained by strong competitive pressures from both domestic and global players and a vulnerability of the companys margins to volatility in prices of key raw materials. The companys business will also remain vulnerable to risks of increased working capital requirements - ability to fund growth in a prudent manner will thus remain a key rating sensitivity. Further, while the order book position is strong, any slowdown in project execution by customers because of factors such as delays in clearances may adversely impact turnover and profits. The Indure Private Limited (IPL) is engaged in undertaking Ash Handling Plant contracts on turnkey basis involving designing, engineering, manufacturing, installation & commissioning and operation and maintenance for Ash Handling Plants. The Company also undertakes EPC contracting for complete power plants and balance of plant packages. Indure is a part of the DESEIN Group of companies. Desein, an ISO:9001 company, is engaged in providing specialised Consultancy Engineering Services for Coal/ Lignite/Diesel as well as Gas based Combined Cycle Power Plants with unit sizes ranging upto 660 MW. The services rendered include Feasibility& Detailed Project Report; Design & Engineering; Procurement Assistance, Project/Construction Management; Inspection & Expediting; Supervision of Construction, Erection, Testing & Commissioning; Operation & Maintenance; Turnkey contracting; Environmental Impact Assessment Studies and Renovation & Modernisation of existing plants. So far it has rendered comprehensive engineering services (from concept to commissioning) for nearly 29,000 MW of Coal/Lignite fired Power Plants as well as Gas/Liquid fuel based Simple and Combined Cycle Power Plants besides undertaking a large number of engineering assignments in the power sector. The group also has a small presence in photovoltaic systems, battery chargers/inverters etc. Apart from Indure Pvt Limited, the other significant company under the group is OPG CAD. OPG CAD was established in 1982 to provide comprehensive consultancy services in the field of engineering, management, information technology, commercial and other related systems. The domestic power generation business has seen a significant growth in the recent past which has mainly been driven by power sector reforms to expand the generation capacity. Currently, about 78,700 MW of power generation capacity (of which 76% , approximately 59693 is planned to be thermal) is projected to
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ICRA Credit Perspective

The Indure Private Limited

be added by 2012 under the power ministrys eleventh plan, which is expected to translate into huge potential demand for thermal power plant equipment manufacturers (including ash handling systems) and related engineering, procurement and construction (EPC) services. Further, rising capital expenditure in the industrial sector have also given impetus to demand for power plant equipments including ash handling systems. The number of thermal plants to be executed in 11th Plan is about 153 in number1. With Thermal projects being the mainstay of the capacity addition during the Eleventh Plan, it is expected to translate into a significant requirement of BoP packages across the country. IPL commands approximately seventy percent of the market share for fly ash disposal systems installed in the country. The Company has been associated with installation of over 220 ash handling plants in India & abroad catering to a total generating capacity of more than 70,000 MW (representing approximately 70% of the total thermal capacity of 99378 MW in the country). This includes successful execution of various ash handling systems for more than 150 units of 210/250/5001700 MW capacity throughout the country and abroad. Further, the industry currently comprises of only 9-10 manufacturers. Healthy order book flow has resulted in healthy revenue growth over the last few years. The net sales of the company has grown from Rs 1372.1 million in FY05 to Rs 7285.7 million in FY09 (CAGR of 52%). However, during FY10, the operating income has remained stagnant with almost 50% share of these revenues from EPC business where in the company has relatively low margins on account of intense competition coupled with the its new entrance into the segment. Nonetheless, the company has been able to secure a slight improvement in its operating margins driven by economies of scale and favourable movements in the prices of main raw materials used by the company during the year (i.e steel, ferro alloys etc). As a result of increase in operating margins and lower interest charges, the net margins have also risen to 3.81% in FY10 from 3.01% in FY09. For 9M FY11, the company has already executed orders worth Rs 550 crore till Feb2011. Further, during FY2011 the company has secured two orders worth Rs 470 crore in coal handling plants which is a relatively high margin business like AHS and is expected to boost the revenues and profitability of the company FY12 onwards. Also, the liquidity position as measured by unutilized bank limits remains adequate. The company has also generated positive cash from operations (adjusted for working capital changes) in the last year. Further, healthy growth in accretions together with decline in WC requirements has led to improvement in gearing from 1.13 to 0.69 times. Subsequently, the NCA/TD has also increased significantly from 38% to 55% during FY10, with the interest coverage indicators also showing improvement.

Company Profile
The Indure Private Limited (IPL) is a Company under DESEIN-INDURE Group of Companies and was promoted by late Mr. O. P. Gupta in 1970. The main companies in the group include: Indure: The Company engages in undertaking ash handling plant contracts on a turnkey basis involving designing, engineering, manufacturing and installation & commissioning of ash handling systems. The Company also undertakes operation and maintenance for Ash Handling Plants. IPL has two workshops/units one located at Sahibabad (U.P.) and other at Sikandarabad (U.P.). Together these units have a foundry, two induction furnaces with 2 tonne capacity each, machine shops and fabrication shops (including fabrication shops for large vessels). Desein Consulting: One of the leading consultancy in the domestic power sector with a track record of over 42 years, having executed more than 29,000 MW capacity of Coal/Lignite/Diesel/Gas based combined cycle plants. Since its establishment in 1970, IPL has been associated with installation of over 190 ash handling plants catering to a total generating capacity of more than 46,000 MW. Over years Indure has also established its presence in international market by executing turnkey contracts in Australia, Vietnam, Indonesia and Malaysia. In the FY 02, the Company also diversified into EPC contracting for complete power plants and balance of plant packages by entering in consortium bidding/execution of EPC with focus on Balance of plant (BoP) and where in BHEL/Tata projects did BTG activities and Reliance Energy undertook Civil part. IPL business activities can be broadly classified into 4 areas of operation: 1) Manufacturing of ash handling plants and undertaking EPC for ash handling plants contracts; 2) Undertaking EPC contracts for complete power plant and balance of plant; 3) Undertaking operating and maintenance service for ash handling plants; 4) Others Including sales of spares, export sales etc. During FY10, the company reported a profit after tax (PAT) of Rs 27.81 crore on an operating income (OI) of Rs 730.82 crore.
1

Source: Central Electricity Authority

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ICRA Rating Services

ICRA Credit Perspective

The Indure Private Limited

April 2011

Rating History

Rating Outstanding Apr 2011

Rs 188.70 crore Long Term Loans/ Fund Based Limits Rs 1184.24 crore Short Term Non-Fund Based Limits LBBB (Positive) A3+

Previous Ratings Mar 2010

LBBB (Stable) A3+

Dec 09
LBBB A3+

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ICRA Credit Perspective

The Indure Private Limited

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