Thejo Engineering Ltd (TEL)

IPO Snapshot

September 03, 2012

Highlights of the issue:

Issue Snapshot:
Issue period September 04 September 06 2012
Price Band: Rs. 402 Rs.430
Issue Size: Rs. 19.00 crs
*Issue Size: 4,41,860 equity shares (incl portion
reserved for market makers)
Total size minus market maker reservation to be
allotted as:
QIB
upto
50% eq sh
Retail
atleast 35% eq sh
Non Institutional atleast 15% eq sh
*= assuming issue subscribed at the upper price band

Face Value: Rs 10
Book value - Consolidated: Rs 220.73 (Marh 31,
2012)
Bid size: 300 equity shares and in multiples thereof
Maximum Subscription amount for Retail investor:
Rs.2 lacs
100% Book built Issue
Capital Structure:
Pre Issue Equity:
Post issue Equity:

Rs
Rs.

1.24 crs
1.66 crs *

*= assuming issue subscribed at the upper price band

Listing: SME Platform of the NSE

Lead Manager: IDBI Capital Market Services
Limited
Registrar to issue: Cameo Corporate Services Ltd.
Current Shareholding Pattern
Pre issue
Shareholding Pattern
%
Promoters & Promoters
78.77
Group
Public (incl Employees &
others)
21.22
Total
100.0

Post issue
%*
58.12
41.87
100.0

*= assuming issue subscribed at the upper price band

CRISIL SME Fundamental Grade: 5/5 indicating

excellent fundamentals

Thejo Engineering Ltd (TEL) is an Engineering Solutions provider for Bulk Material
Handling, Mineral Processing and Corrosion Protection to the Core Sector
Industries like mining, power, steel, cement, ports, fertilizers etc. Its services
include belt conveyor maintenance and operations, while its product portfolio
covers design, manufacture and supply of engineering products for Bulk Material
Handling, Mineral Processing and Corrosion Protection. In fiscal 2012 products and
services contributed ~ 53 % and ~ 43% of its total income. The remaining was
contributed by its trading activities in rubber and conveyor system related products.
TEL is one of the few companies in the sub continent offering manufacturing,
marketing and servicing activities under one roof. Its services business caters to
Belt Splicing, Pulley Lagging, Belt conveyor maintenance, Installation of Belt
Conveyors, Belt Reconditioning, Rubber Lining etc. On the other hand its products
business caters to design, development, manufacture and supply of Rubber and
Polyurethane engineering products for belt cleaning, spillage control, enhanced
flow of material, impact & abrasion protection, screening, rubber & polyurethane
linings. Since the last two years it has initiated trading in certain manufactured
products of international repute, which supplements its current product line.
TEL has four manufacturing units, all of which are located near Chennai and has
pan India presence through its 11 branch offices and 36 site offices located across
14 states. Its international presence through partnerships and distribution network
extends across Australia, kingdom of Saudi Arabia, the USA, Germany, Chile,
Brazil and Ghana.
Objects of Issue:
The objects of the Issue are: to finance expansion plans and achieve the benefits of
listing on the Stock Exchange
It intends to utilize the Issue Proceeds for the following objects
Setting up a polyurethane unit at Chennai.
Expansion of existing facility at Chennai
Setting up R&D Unit at Chennai
Setting up a lining plant at Chennai
Investment in its Australian Subsidiary, Thejo Australia Pty Ltd
General corporate purposes.
The companys total consolidated revenues were Rs 11803.73 lacs for the year
ended March 31, 2012 as against Rs 9620.56 lacs in FY11 and PAT was
Rs.900.71 lacs in FY12 as against of Rs 382.26 lacs in FY11.
Means of Finance:
Rs. lacs
S. No. Particulars
1 Gross proceeds to be raised through this Issue (Issue Proceeds)*
2 Less Pre-IPO Placement
3 Net Proceeds to be raised through this Issue excluding Pre-IPO Placement
4 Issue Related Expenses
Net proceeds of the Issue after deducting the Issue related expenses from
5 the Issue Proceeds

Particulars
Setting up a poly-urethane unit at chennai
Expansion of existing facility (Unit I) at Chennai
Setting up R&D Unit at Chennai

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(Source: RHP)

Cost of Project:
S.
No.
1
2
3

FY 14
2100.00
199.99
1900.01
*

Rs. lacs
Total Fund
Requirement
68.28
686.61
283.05

Amount
Deployed Estimated Amount to
till July,
be utilized from Net
2012
Proceeds
34.31
68.28
37.88
686.61
19.25
283.05

FY 13 FY 14
33.97 0.00
648.73 0.00
263.80 0.00

4 Setting up a Lining Plant at Chennai

5 Investment in its Australian Subsidiary, Thejo Australia Pty Limited.
6 General corporate purposes
Total

169.02
642.00
*
*

0.00
0.00
*
91.44

169.02 169.02
642.00 642.00
*
*
*

0.00
0.00
*
*

(Source: RHP)

TELs strengths:

Established brand.
Organized and Comprehensive product & service offering.
Continuous innovation of Product and Services.
Relationships with customers.
Professional management.
Dedicated team of technical manpower
Pan India operations with reach to remote areas

TELs strategy:

Broad basing its domestic reach.

Polyurethane Division.
Enhance product and service lines through emphasis on R&D.
Diversify geographically into new locations
Expand production capacity
Attract, train and retain qualified personnel.

Risks & Concerns:

TELs business is dependent on the availability/supply and cost of raw materials. Any significant increase in the prices or decrease in
the availability of these raw materials may adversely affect its results of operations.
Part of the Net Proceeds from the Issue will be invested in its Australian subsidiary. However, such investments have not been
appraised by any independent valuer.
TEL does not have any long-term contracts with its customers, which may adversely affect its results of operations.
Business and future results of operations of TEL depends, to a significant extent, upon its ability to successfully commercialize its
R&D efforts by way of cost and time efficiencies or the development of new products.
TEL faces competition in its business from organized and unorganized players, which may adversely affect its business operation
and financial condition.
The shortage or non-availability of power may adversely affect the manufacturing processes and TELs performance may be affected
adversely.
As a manufacturing business, TELs success depends on the smooth supply and transportation of its products from its plants to its
customers. Supply and transportation are subject to various uncertainties and risks, and delays in delivery or non-delivery may result
in rejected or discounted deliveries
TELs results of operations could be adversely affected by strikes, work stoppages or increased wage demands by its employees or
any other kind of disputes with its employees.
TELs agreements with various banks for financial arrangements contain restrictive covenants for certain activities and if it is unable
to get their approval, it might restrict its scope of activities and impede its growth plans.
Any inability to manage TELs growth could disrupt its business and reduce its profitability.
Under-utilisation of TELs proposed expanded capacities may adversely impact its financial performance
The loss of or shutdown of operations at TELs production facilities may have a material adverse effect on its business, financial
condition and results of operations.
Taxes and other levies imposed by the Government of India or other State Governments, as well as other financial policies and
regulations, may have a material adverse effect on TELs business, financial condition and results of operations.

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Extract from grading rationale by CRISIL:

CRISIL has assigned a CRISIL SME fundamental grade of SME 5/5 (pronounced "SME five on five") to the proposed IPO of Thejo
Engineering Ltd (Thejo). This grade indicates that the fundamentals of the IPO are excellent as compared to other SMEs in India.
Thejo has established position in the niche operations of bulk material handling, mineral processing and corrosion protection
applications in power, cement, steel, ports and mining industries, which has secured it a diversified client and revenue mix. The
company is expected to benefit from end-market trends such as (a) increased preference for outsourcing material handling operations;
(b) growth in end-user industries; and c) increased preference for conveyors to transfer material. Further replacement demand would
provide revenue stability. The managements deep expertise in the industry has helped them to be proactive in product innovation,
giving the company a competitive edge. Thejos entry into overseas markets like Ghana in Africa and Australia, has opened up new
opportunities, though its success is a key monitorable.
On the other hand the company operates in a cyclical industry its production declined 21.5% in FY10 on account of economic
slowdown. Further, Thejos dealer in Australia (13.7% of FY11 sales) was acquired by a competitor in February 2011, thereby
increasing the risk of loss of business in Australia. However, the company has maintained its sales to the client in 9MFY12. Also, Thejo
has set up its own operations in Australia to counter the same.

RETAIL RESEARCH Fax: (022) 30753435 Corporate Office

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offer to sell or a solicitation to buy any security. The information contained herein is from sources believed reliable. We do not
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Disclaimer: HDFC Bank (a shareholder in HDFC Securities Ltd) is associated with this issue in the capacity of Bankers to the issue
and will earn fees for its services. This report is prepared in the normal course, solely upon information generally available to the
public. No representation is made that it is accurate or complete. Notwithstanding that HDFC Bank is acting for Thejo Engineering Ltd.,
this report is not issued with the authority Thejo Engineering Ltd. Readers of this report are advised to take an informed decision on the
issue after independent verification and analysis.

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