Buy at Decline CMP 415 Target Price 468 Investment...

Transformer Industry ACMIIL �

R E P O R TS E C T O R

Transformer Industry

AnalystChinmay [email protected]: (022) 2858 3407

TRIL

CMP 415

Target Price 468

VTL

CMP 905

Target Price 1051

03 Feb, 2010 We believe investments in T&D infrastructure will drive growth for Transformer industry. We initiate coverage on Transformers & Rectifiers India Ltd (TRIL), and Voltamp Transformers Ltd (VTL). We recommend a Buy at Decline on TRIL with a price target of INR468 and BUY for VTL with a price target of INR1051.

Investment Thesis

India has set for itself ambitious targets of investments in the power sector, in view of the significant power deficit and sustaining the economic growth momentum. The momentum of capacity addition is expected to improve in the later half of the Eleventh Plan and continue at a higher rate during the Twelfth Plan, with large capacity additions lined up by the private sector.

Investments of INR3.5 trillion and INR4.7 trillion are expected in the power sector during the eleventh and twelfth five-year plan periods, respectively. Capacity addition of 54,000MW is expected during the eleventh plan and ~1,00,000MW is planned for the twelfth plan periods. With huge power plants coming up, the need for transmission will drive demand for transformers. Significant opportunities are present in 400 Kv, 220 Kv and 132 Kv classes; ~33,878 ckm of 400KV, 26,510 ckm of 220 Kv, 19,708 ckm of 132 Kv and 8,671 ckm of 66 Kv transmission lines are expected to be added by the end of the eleventh plan period, which would need step-up/down transformers.

Power Grid Corporation of India (PGCIL) plans to increase interregional transmission capacity (national grid) from 16,450 MW in 2007 to 37,150 MW by 2012, a CAGR of 18% over 2007-12. Moreover, power sector reforms such as APDRP and RGGVY have thrown up opportunities for the industry and TRIL.

Approximately 97,456 MVA of transformer capacity was added during 1983-87 and 238,150 MVA during 1987-91. As average life of a transformer is 25 years they are expected to be replaced during the eleventh and twelfth plan periods.

Thus, significant capacity addition during the eleventh and twelfth plan periods, focus on transmission and distribution along with replacement demand will present significant opportunities for Transformer manufacturers.We initiate coverage on Transformers & Rectifiers India Ltd (TRIL), and Voltamp Transformers Ltd (VTL).TRIL: At CMP of INR415, TRIL is trading at a P/E of 10x its FY11E and 8.9x its FY12E earnings. Looking at opportunities that lie in the power sector, TRIL’s capabilities in 400Kv class category, its annual capacity of 23,200 MVA and strong order book we assign a P/E multiple of 10x to its FY12E earnings and recommend a “Buy at Decline” on the stock with a price target of INR 468.VTL: As significant portion of balance sheet constitutes of investments, we have valued core (transformer) business separately and then added investments per share. We have assigned a P/E of 10x to Voltamp’s core (transformers) business earnings of INR 70 (FY12E) to arrive at value per share of INR 700. Considering investments per share of INR351 (FY12E) and core business value of INR700/share, we initiate coverage on Voltamp Transformer Limited with a “BUY” recommendation and a price target of INR1051.



Power industry

Demand/supply scenario

Power demand increased at a 5% CAGR to 700 billion Kwh in 2007-08 from 410 billion Kwh in 1996-97. However, supply remains a concern. Supply rose to 650 billion Kwh in 2007-08, from 360 billion Kwh in 1996-97.

Demand is estimated to grow at 7% and 8% CAGR in the eleventh and twelfth five-year plan periods, respectively, which would be catered to by new capacity additions.

In line with the power requirements of the country, GoI is targeting capacity additions of 70,000MW and 100,000MW in the eleventh and twelfth five-year plan periods, respectively. However, looking at the trend of actual capacity additions, ~54,000MW is expected to be added during the eleventh five-year plan period.

Deficit is expected to continue

Power deficit was ~10% in 2007-08. Despite the estimated addition of ~54,000MW in the eleventh five-year plan period, the deficit would continue. However, a balanced scenario is expected by the end of twelfth five-year plan period.

●

●

Expected capacity addition of ~54,000 MW in the eleventh

plan and Target capacity addition of 1,00,000 MW for the

twelfth plan

Power deficit expected to continue in eleventh plan

Source: CRISIL

(billion Kwh)

Supply Demand

250300350400450500550600650700

1991-9

2

1992-9

3

1993-9

4

1994-9

5

1995-9

6

1996-9

7

1997-9

8

1998-9

9

1999-0

0

2000-0

1

2001-0

2

2002-0

3

2003-0

4

2004-0

5

2005-0

6

2006-0

7

2007-0

8200

Planned Vs Actual Capacity Addition

0100002000030000400005000060000700008000090000

100000

1980-85 1985-90 1992-97 1997-02 2002-07 2007-12E 2012-2017E

MW

Target ActualSource: CRISIL, ACMIIL Research



Investments in the power sector

Investments in the power sector are expected to grow at a 7% CAGR to INR3.5 trillion in the eleventh five-year plan period, a huge rise from the last few five year plans. A large share of investment, ~INR2.2 trillion, could be in generation, followed by INR0.9 trillion and INR0.4 trillion in distribution and transmission, respectively.

Investment in transmission

Transmission is split into transmission lines and substation, with each accounting for 50% of the cost. Transformers form a major component of substation and account for around 30% of the cost, while switchgears account for nearly 40%.

●

●

Transformers accounts for ~30% of the substation

component cost

Source: CRISIL Research

Surplus (deficit) percentAvailabilityRequirement

200

400600800

1000120014001600

0.0

-10%

-8%

-6%

-4%

-2%

0

2%

-12%2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Bn Kwh Per cent

Source: CRISIL

Transmission

Conducters(45%)

Transmission LineTowers (TLT) (35%)

Others(20%)

Transformers(30%)

Transmission Line(50%)

Substation component(50%)

Others(30%)

Switchgears, circuitbreakers, SCADA, etc (40%)



Transformer Industry

OverviewThe power sector value chain comprises generation, transmission and distribution (T&D). Electricity generated at a power plant is transmitted to the nearest grid via step-up transformers and then to the state grid (via step-up or step-down transformers). Then it is transmitted to a power substation via step-down transformers. Finally, distribution transformers are used to transmit power from the sub-transmission point to end consumers.

Power transformers account for 70-75% of the total installed capacity while distribution transformer accounts for the remaining 20-25%. In the power transformer segment, step-down transformers account for 75-80% of the total installed capacity while step-up transformers account for the rest.

Demand – Supply

Demand

Installed transformer capacity on the grid has increased at a 6% CAGR to 1,019,283 MVA in 2007 from 467,517 MVA in 1994. Power generation capacity grew to 132,329 MW in 2007, from 76,754 MW in 1994. Thus, for addition of each MW in generation, ~7 MVA of transformer capacity was added on the grid. MVA per MW increased from 6 MVA per MW in 1994 to 7.7 MVA per MW in 2007 and is expected to increase further given the Government of India’s (GoI) increased focus on transmission and distribution to reduce transmission losses.

Year Transformer Capacity

installed on the Grid (MVA)

Total Power capacity (MW) MVA per MW

1994 467,517 76,754 6.09

1995 493,793 81,172 6.08

1996 511,432 83,295 6.14

1997 497,412 85,796 5.80

1998 580,319 89,103 6.51

1999 584,095 93,416 6.25

2000 655,962 97,948 6.70

2001 649,455 101,997 6.37

2002 687,646 105,112 6.54

2003 725,837 108,085 6.72

2004 759,240 112,171 6.77

2005 906,107 114,164 7.94

2006 965,198 124,287 7.77

2007 1,019,283 132,329 7.70

Source: ACMIIL Research, CRISIL

●

Source: CRISIL

Transmissionline towers (TLT)

Step up transformer[220kv-765kv]

Power generatingstation

[1.1 kv-33 kv]

Receiving substation[220kv-765kv]

Step down powerTransformer

[330kv-220kv]

Step down powerTransformer[33kv-220kv]

DistributionTransformer[33kv-220kv]

End Users[Residential/commercial

users]

Transmissionline towers (TLT)



Demand for transformers includes fresh demand (i.e. ~7MVA per MW) and replacement demand, as average life of a transformer is 25 years.

Eleventh five-year plan Capacity of ~54,000MW is expected to be added in the eleventh five-year plan period. This translates into incremental demand of ~415,353 MVA for transformers. The average life of a transformer is 25 years, which means that transformers installed during 1982-83 to 1986-87 would be due for replacement in the eleventh five-year plan period. Around 97,456 MVA of transformer capacity was added during 1982-83 to 1986-87. Thus, demand of ~ 512,809 MVA of transformer capacity is expected during the eleventh five-year plan period. In addition, ~12,000 to 15,000 MVA of transformers are exported every year.

Demand for transformers - 11th five year plan

Year Total Generation Capacity (MW)

Generation addition (MW)

Transformer Capacity required (MVA)

Fresh demand for Transformer (MVA)

Replacement demand (MVA)

Transformer Demand (MVA)

2008 143,061 10,732 1,101,570 82,287 19,491 101,778

2009 147,965 4,904 1,139,334 37,764 19,491 57,255

2010E 158,030 10,065 1,216,834 77,501 19,491 96,992

2011E 171,933 13,903 1,323,887 107,053 19,491 126,544

2012E 186,316 14,383 1,434,636 110,749 19,491 130,240

Total 415,353 97,456 512,809

Source: CRISIL, ACMIIL Research

Twelfth five-year planAssuming that ~65,000 MW of capacity would be added during the twelfth five-year plan period, incremental demand of 500,500 MVA and replacement demand of 238,150 MVA is expected.

Particulars 12th plan

Capacity Addition (MW) 65,000 MW

Expected Demand of Transformers - MVA New Replacement Total

Power Transformer 370,371 209,359 579,730

Distribution Transformer 130,129 28,791 158,920

Total Demand 500,500 238,150 738,650

Source: ACMIIL Research, CRISIL

Supply Over the past four years, organized players have accounted for 80-85% of production of transformers in India. These players increased their capacity from 97,787 MVA in FY06 to 152,065 MVA in FY09 to tap demand and grab the opportunity arising from the demand-supply mismatch. Installed capacity of these players currently stands at 172,065 MVA.

●

Source: ACMIIIL ResearchNote: RGGVY: Rajiv Gandhi Grameen Vidyutikaran Yojana, APDRP: Accelerated Power Development & Reforms Programme

Demand forTransformers Fresh Demand Replacement

Demand

Capacity Addition Policies Development ofNational Grid RGGVY APDRP

Export DemandDevelopment of newIndustrial areas-Sez's-Industrial Belt, etc



Top 10 players (Organized sector)

Particulars (MVA) FY06 FY07 FY08 FY09 Current capacity

Capacity 97,787 113,360 144,190 152,065 172,065

Production 68,008 90,810 107,723 122,487 NA

Utilization level 69.5 80.1 74.7 80.5 NA

Source: ACMIIL Research

Considering the expansion projects under implementation, an additional capacity of ~40,000 MVA is expected by the end of the eleventh plan period, which would take the total capacity to ~2,10,000 MVA p.a. Thus installed capacity should be sufficient to cater to the demand for transformers.

Peer group profile

Fragmented industry with ~10 to 12 organized players

The Indian transformer industry (including un organized players) was estimated to be around INR80 billion as of FY08. The industry is fragmented with only a few organized players such as BHEL, ABB, Crompton Greaves, Areva T&D, EMCO, Bharat Bijlee, Indo Tech Transformers Ltd, Voltamp, Vijai Electricals, TRIL, and IMP Powers. Market share of organised players is to be approximately 80-85% per cent.

Product Profile – Primary presence in up to 220 Kv class

In the power transformer category, companies in the high-end segment (400 KV and above) mainly include international players such as ABB, Areva T&D India, and Siemens and Indian manufacturers such as BHEL, Crompton Greaves, TRIL and Vijai Electricals. Most other players are present in up to 220 Kv and in distribution transformers.

Particulars Power Transformers Distribution Transformers

Up to 220 Kv 220 Kv to 400 Kv 400 Kv & above

Emco Ltd -

Bharat Bijlee Ltd - -

Indo Tech Transformers Ltd -

Voltamp Transformers Ltd - -

Vijai Electricals

TRIL

Source: CRISIL

Significant capacity expansion

Large players such as BHEL, ABB, Areva T&D, Crompton Greaves, and Siemens have capacity of more than 15,000 MVA p.a. However, they are diversified power equipment players and the transformer segment is not a major revenue contributor. Among players who primarily manufacture transformers, TRIL is the largest by capacity followed by EMCO, Vijai Electrics, Voltamp, and Bharat Bijlee. Most players have significantly expanded capacity to tap demand. Over the past four years, capacity utilization has improved to 80%, on the back of strong demand and as expansion projects were under construction for majority of the companies.

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●

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Particulars – MVA FY06 FY07 FY08 FY09

Voltamp

Capacity 5,400 7,200 9,000 9,000 (13,000-Current Capacity)

Production 4,503 6,188 7,898 9,541

Utilization 83.4 85.9 87.8 106.0

TRIL

Capacity 5,400 7,200 7,200 7,200 (23,200 –Current capacity)

Production 3,780 5,040 5,763 7,248

Utilization 70.0 70.0 80.0 100.7

Bharat Bijlee

Capacity 8,000 8,000 8,000 11,000

Production 4,019 6,359 8,111 7,589

Utilization 50.2 79.5 101.4 69.0

EMCO

Capacity 10,000 10,000 20,000 20,000

Production 7,443 8,406 10,743 10,946

Utilization 74.4 84.1 53.7 54.7

Indo tech

Capacity 2,450 3,350 7,450 7,450

Production 1,843 2,298 2,783 3,101

Utilization 75.2 68.6 37.4 41.6

ABB

Capacity 10,000 12,000 12,000 16,875

Production 5,555 8,127 8,944 15,151

Utilization 55.6 67.7 74.5 89.8

Crompton Greaves

Capacity 23,404 25,970 24,670 24,670

Production 14,381 18,895 22,765 23,405

Utilization 61.4 72.8 92.3 94.9

BHEL

Capacity 16,000 17,500 20,500 20,500

Production 14,847 18,783 17,960 21,704

Utilization 92.8 107.3 87.6 105.9

Areva T&D

Capacity 8,500 9,000 15,000 15,000

Production 5,588 8,450 12,075 14,635

Utilization 65.7 93.9 80.5 97.6

Vijai Electrics

Capacity 8,633 13,140 20,370 20,370

Production 6,049 8,264 10,681 9,167

Utilization 70.1 62.9 52.4 45.0

Top 10 players

Capacity 97,787 113,360 144,190 152,065

Production 68,008 90,810 107,723 122,487

Utilization 69.5 80.1 74.7 80.5


Currently, BHEL and Areva T&D are undertaking capacity expansion of 25,000 MVA and 15,000 MVA, respectively, which would be commissioned by the end of the eleventh five year plan. Going forward, it appears unlikely that companies would undertake new projects given that significant capacity has built up in the industry.

Order Book – Revenue visibility of 6 to 9 months

Most transformer manufacturers have a strong order book, with revenue visibility of 6 to 9 months. Companies such as TRIL and EMCO, which have doubled capacity to 20,000 MVA and above, have been successful attracting in incremental orders.

Particulars Voltamp TRIL Bharat Bijlee EMCO Indo tech

Order book Q2 FY10 (INR Mn) 4,510 4,491 3,919 5,440 700

Order book Q2 FY10 (MVA) 8,110 10,200 NA 11,700 NA

Order book to TTM Sales 0.87 1.10 0.72 0.56 0.56


●



The industry is typically characterized by high revenue growth, healthy return ratios, and negligible debt

Particulars Voltamp TRIL Bharat Bijlee EMCO Indo tech

Net Sales 6,430.6 4,305.0 5,447.0 9,962.6 2,067.4

Sales CAGR FY06-09 37.2 48.7 21.9 35.0 30.7

OPM 23.3 15.7 15.1 13.9 29.2

NPM 17.9 10.5 8.8 5.3 18.8

EPS CAGR FY06-09 70.8 46.1 12.4 21.8 49.4

D/E 0.0 0.2 0.1 0.8 0.1

RONW 43.4 18.2 24.0 12.1 26.6

ROCE 64.0 24.2 36.2 17.4 40.0


Over the past three years, the industry has recorded strong sales growth CAGR of more than 30% back by demand and rise in commodity prices.

Over the years operating margins have also improved owing to strong demand and limited supply (as capacity expansion plans were under construction during the period).

The industry is characterized by healthy return ratios. Players such as Voltamp have outperformed the industry with ROCE and RONW in excess of 40% owing to focus on the industrial segment. Voltamp sold customized products to industrial clients, which fetched better margins. It also enjoyed lower working capital requirement on account of faster recovery of dues from industrial clients.

Most players have negligible debt as well as investments in liquid funds.

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●

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Transformers & Rectifiers India Ltd (TRIL), incorporated in 1994, manufactures power, distribution, furnace and specialty transformers. The company has three manufacturing facilities in Changodhar, Odhav and Moraiya. Currently, it has the second-largest installed capacity (23,200 MVA) in India. SEBs and utility companies comprise ~70% of its clients. TRIL’s current order book (Q3FY10) stands at INR3,732 million, ~0.85x TTM sales.

Product Range

TRIL primarily manufactures power transformers. In this segment company has capability to manufacture 220 kv as well as 400 Kv class transformers. Recently, it successfully executed an order for supply of 400 Kv transformers to LANCO. The company also produces distribution and industrial transformers.

Facilities

TRIL has three manufacturing units in Moraiya, Odhav and Changodar near Ahmedabad, Gujarat. It started a new facility with an annual capacity of 16000 MV p.a. in Moraiya in May 2009. As a result, the total annual capacity has increased to 23,200 MVA from 7,200 MVA in FY09. For FY10, TRIL expects production of 3,000-4,000 MVA from this plant. The plants in Moraiya and Changodar primarily manufacture power transformers, while Odhav produces distribution transformers.

Particulars Annual Capacity Built-up area Capability

Moraiya 16,000 MVA 14,000 Sq. M Production and testing of 765 kV Transformers

Changodar 6,000 MVA 7,200 Sq. M Production and testing of 245 kV Transformers, up to

160 MVA.

Odhav 1,200 MVA 600 Sq. M Production and testing of transformers up to 66 kV, up

to 15 MVA

Source: Company

Order book

Order book growth

The order book grew from INR3,398 million in FY08 to INR3,732 million in 3Q FY10. The MVA order book increased from 6350 MVA in FY08 to 9095 MVA in 3Q FY10. Order intake increased sharply during 1Q FY10 as the same period also saw Moraiya facility coming on stream. The current order book of INR3732 million is ~0.85x TTM sales and provides revenue visibility for six to nine months.

●

Key Data (INR)

CMP 415

Target Price 468

Key Data

Bloomberg Code TRIL IN

Reuters Code TRNF.BO

BSE Code 532928

NSE Code TRIL

Face Value (INR) 10

Market Cap. (INR Mn.) 5221

52 Week High (INR) 459

52 Week Low (INR) 102.6

Avg. Daily Volume (6m) 23267

Shareholding %

Promoters 76.8

FII 2.0

DII 4.6

Others 16.7

Total 100

B U Y a t D e c l i n e

Transformers & Rectifiers India Ltd

Types ofTransformers

PowerTransformers

DistributionTransformers

FurnaceTransformers

RectifierTransformers

160 KVA & above,upto 33KV class

5 MVA to 160MVA/400KV 105 KA Upto 160KA DC

Source: Company, CRISIL

Transformer Industry ACMIIL �0


Order book break upOver the past three quarters, power transformer orders have been in excess of 70% of the total order book. By transformer class, majority of orders are for 120 Kv and 220 Kv.

Capex TRIL undertook capex of INR700 million for the 16,000 MVA green field facility in Moraiya. The project was primarily funded through proceeds from an IPO during FY08. TRIL started the facility in May 2009; with this, the company has more than tripled its production capacity to 23,200 MVA p.a. TRIL has no further capex plans in the near term.

●

Source: Company

Order book

INR Mn MVA

0

2,000

4,000

6,000

8,000

10,000

12,000

3,398 3,837 3,830 3,8884,491

6,3507,240 7,093 7,134

10,728 10,2009,229

4,574 4,892

FY08 Q1 FY09 Q2 FY09 Q3FY09 Q4 FY09 Q1 FY10 Q2 FY10 Q3 FY10

3,732

9,095

Order Book Break up (Q3 FY 10)

Furnace & Rectifier6%

Export4%

Power85%

Distribution5%

Order Book-Transformer Class>72.5 KV &<145 KV

32%

>145 KV &<245 KV50%

>36 KV &<72.5 KV2%

<36 KV15%

>245 KV1%

Source: Company

Current order book of INR3732 million is ~0.85x TTM sales and provides revenue visibility for

six to nine months

Majority of orders are of 120 Kv and 220 Kv

Transformer Industry ACMIIL ��


SWOT Analysis

StrengthsCapability to manufacture 400 & above Kv class transformers: TRIL is one of the few players that can manufacture transformers of 400 Kv & above. The Moraiya facility is well equipped and has a capacity to produce and test up to765 Kv transformers. So far, in 400KV, the company has supplied two transformers to LANCO.

Particulars Power Transformers

Up to 220 Kv 220 Kv to 400 Kv 400 Kv & above

Emco Ltd - -

Bharat Bijlee Ltd - -

Indo Tech Transformers Ltd -

Voltamp Transformers Ltd - -

Vijai Electricals

TRIL

Source: Crisil Research

The company has also developed in-house design and engineering capabilities. It has approval from utilities for manufacturing power transformers of up to 400 kv without any external technological support. Recently, it implemented a LANCO order with in-house technology.

SEBs account for 70% of revenueTRIL primarily supplies transformers to SEBs which contribute to ~70% of its total revenue; industrial users account for the rest (Annexure III- TRIL Client List). With SEBs as its customers, TRIL is insulated from fluctuation in raw material prices to an extent, as owing to the built-in price variation clause (Annexure IV – Price Variation Formulae), it is passed on to the SEBs. Moreover, the company is also protected from any slowdown in investments in the private sector.Negligible debt and investments in liquid fundsThe gestation period to manufacture a transformer is 3 to 6 months; this, coupled with debtor days of more than 120 (as majority clients are SEBs) result in a higher working capital requirement. In a working capital-intensive business, funding and working capital management are important success factors. TRIL has INR761.7 (FY09) million in current investments and a low D/E ratio of 0.2, which enable the company to fund its working capital requirements.Second-largest facility: TRIL has a production capacity of 23,200 MVA, second-largest after Crompton Greaves. Thus, the company should be able to explore significant growth opportunities.Strong order book: TRIL has a strong orderbook of INR3,732million (~0.85x TTM sales), which provides revenue visibility for six to nine months.

WeaknessesSignificant capacity build-up to impact realization: Over the past five years, owing to the demand-supply mismatch, transformer manufacturers have recorded higher realization and profitability. However, significant capacity has been built up in the industry. Transformer capacity has increased to ~2,00,000 MVA from ~1,25,000 MVA in FY06. In addition, ~40,000 MVA is expected to be operational by the end of the eleventh plan period. Thus, considering this and the competition, realizations are expected to drop and in turn impact the growth of the company.

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Dependence on imports for CRGO (Cold Rolled Grain Oriented Steel): CRGO constitutes ~35% of the raw material cost. The component is not manufactured in India due to high manufacturing cost. Indian manufacturers including TRIL are thus exposed to possible constraints on timely availability of CRGO.

Opportunities

Significant capacity addition during the eleventh and twelfth plan periods: Capacity addition of 54,000MW is expected during the eleventh plan and ~1,00,000MW is planned for the twelfth plan periods. With huge power plants coming up, the need for bulk transmission will drive demand for higher class transformers.

Focus on transmission and distribution:

Power Grid Corporation of India (PGCIL) plans to increase interregional transmission capacity (national grid) from 16,450 MW in 2007 to 37,150 MW by 2012, a CAGR of 18% over 2007-12. Moreover, power sector reforms such as APDRP and RGGVY have thrown up opportunities for the industry and TRIL.

Replacement demand: Approximately 97,456 MVA of transformer capacity was added during 1983-87 and 238,150 MVA during 1987-91. As average life of a transformer is 25 years, transformers are expected to be replaced during the eleventh and twelfth plan periods.

ThreatsSevere competition: MNCs such as ABB and Areva T&D have strong presence in the Indian market. In addition, ten to twelve domestic manufacturers as well as un-organized players are competing for orders from SEBs, utilities and industrial clients. This makes the market very competitive, especially since the orders normally are awarded to bidders with a high technical score and the lowest bid.

Financials

Net sales TRIL’s net sales grew at a 49% CAGR to INR4,305 million in FY09, from INR1,308.3 million in FY06, driven by capacity addition and healthy realization on the back of rise in commodity prices.

We expect TRIL’s realization to decrease (FY09-12) due to significant capacity build-up in the industry. However, we expect net sales to grow at a CAGR of 12% to INR6,257 million in FY12, from INR4,305 million in FY09, primarily driven by volume growth.

●

●

●

●

●

Source: ACMIIL Research, Company

Net Sales

1,308

2,212

3,057

4,3054,686

5,6626,2579

FY06 FY07 FY08 FY09 FY10E FY11E FY12E

Rs.m

n

0

1000

2000

3000

4000

5000

7000

6000

MVA

Production Capacity Utilization Level

Capacity and Production Details

%

0

5,000

10,000

15,000

20,000

25,000

0

20

40

60

80

100

120105

4960

77

FY06 FY07 FY08 FY09 FY10E FY12EFY11E

7,5265,543

4,3285,400

7,200 7,20056

4352

7,20010,000

2,630

13,00012,000

23,200 23,200 23,200



Margins

We expect operating profit margin to decrease in FY11E and FY12E to 15% and 14.5%, respectively, due to capacity build-up in the industry.

We estimate PAT margin to fall to 9.5% and 9.7% in FY11E and FY12E from 10.5% in FY09 owing to fall in operating margins.

Valuation and Recommendation

At CMP of INR415, TRIL is trading at a P/E of 10x its FY11E and 8.9x its FY12E earnings. Looking at opportunities that lie in the power sector, TRIL’s capabilities in 400Kv class category, its annual capacity of 23,200 MVA and strong order book we assign a P/E multiple of 10x to its FY12E earnings and recommend a “Buy at Decline” on the stock with a price target of INR 468.

Source: ACMIIL Research, Company

Percen

tage

Margins

OPM NPM

02468

101214161820

FY07 FY08 FY09 FY10E FY12EFY11E

15.6

19.0

15.8 15.5 15.0 14.5

8.0

11.3 10.59.4 9.5 9.7

One year forward P/E Chart

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28-Ma

y-09

28-Jun

-0928-

Jul-09

28-Au

g-09

28-Sep

-0928-

Oct-09

28-No

v-09

28-De

c-09

28-Jan

-10

700

600

500

400

300

200

100

0




Profit & Loss Account INR Mn

Particulars FY06 FY07 FY08 FY09 FY10E FY11E FY12E

Net Sales 1,308.3 2,212.0 3,057.1 4,305.0 4,686.4 5,662.5 6,257.0

Total Expenditure 1,165.7 1,867.2 2,474.8 3,627.0 3,960.0 4,813.1 5,349.8

Operating Profit 142.6 344.8 582.2 678.0 726.4 849.4 907.3

Other Income 6.7 7.6 59.1 108.1 50.0 75.0 100.0

EBIDTA 149.3 352.4 641.3 786.1 776.4 924.4 1,007.3

Depreciation 8.4 16.8 21.5 28.0 53.7 61.8 64.6

EBIT 140.9 335.5 619.7 758.1 722.7 862.6 942.7

Interest 21.2 55.0 81.1 74.8 48.0 42.0 20.0

PBT 119.7 280.6 538.7 683.3 674.7 820.6 922.7

Taxes 43.2 100.1 186.5 225.3 236.1 283.1 318.3

PAT 76.5 176.3 346.0 452.4 438.6 537.5 604.4

Growth in sales (%) 69.1 38.2 40.8 8.9 20.8 10.5

Growth in Operating profits (%) 141.8 68.9 16.5 7.1 16.9 6.8

Growth in PAT (%) 130.3 96.3 30.7 -3.1 22.6 12.4

OPM (%) 10.9 15.6 19.0 15.7 15.5 15.0 14.5

Net Profit Margin (%) 5.9 8.0 11.3 10.5 9.4 9.5 9.7

Source: Company, ACMIIL Research

Balance Sheet INR Mn


Sources of Funds

Share Capital 68.2 70.9 129.2 129.2 129.2 129.2 129.2

Reserves and Surplus 147.4 345.2 1,963.3 2,354.9 2,733.5 3,211.0 3,755.4

Total Shareholders Funds 215.5 416.2 2,092.5 2,484.2 2,862.7 3,340.2 3,884.6

Total Loan Funds 174.1 317.3 384.2 608.9 400.0 350.0 100.0

Net Deferred Tax Liability 14.8 15.3 2.1 9.6 9.6 9.6 9.6

Minority interest 0.0 18.5 24.6 28.1 28.1 28.1 28.1

Total Capital Employed 404.4 767.3 2,503.5 3,130.7 3,300.4 3,727.9 4,022.3

Application of Funds

Gross Block 152.5 251.6 321.5 560.5 1,074.0 1,124.0 1,174.0

Less: Accumulated Depreciation 41.4 61.4 82.6 109.8 163.5 225.3 289.9

Net Block 111.1 190.2 238.9 450.7 910.5 898.7 884.1

Capital Work in Progress 9.8 51.3 191.7 413.5 20.0 20.0 20.0

Investments 0.0 2.1 760.9 766.5 766.5 766.5 1,216.5

Net Current Assets 282.9 523.4 1,311.4 1,499.9 1,603.3 2,042.6 1,901.6

Total Assets 404.4 767.3 2,503.5 3,130.7 3,300.4 3,727.9 4,022.3




Cashflow Statement INR Mn


Pre tax profit 119.7 280.6 538.7 683.3 674.7 820.6 922.7

Add

Depreciation 8.4 16.8 21.5 28.0 53.7 61.8 64.6

Interest Exp 21.2 55.0 81.1 74.9 48.0 42.0 20.0

Profit before working capital changes 147.1 353.6 613.0 719.8 776.4 924.4 1,007.3

Working capital changes -113.4 -249.0 -814.2 -236.0 -100.3 -407.0 106.8

Less Taxes -45.2 -49.6 -206.7 -208.3 -236.1 -283.1 -318.3

Net Cash flow from operating activities -11.5 55.1 -407.9 275.5 440.0 234.2 795.7

Net Cash flow in investment activities -41.6 -85.2 -936.6 -404.9 -120.0 -50.0 -500.0

Net Cash flow from financing activities 52.9 36.7 1,361.7 105.8 -316.8 -152.0 -330.0

Net increase /(decrease) in cash -0.2 6.7 17.2 -23.7 3.2 32.3 -34.2

Op. balance of cash and cash equivalents 0.4 1.4 8.0 25.2 1.5 4.7 37.0

Cl. balance of cash and cash equivalents 0.2 8.0 25.2 1.5 4.7 37.0 2.7


Ratios


Profitability Ratios

OPM (%) 10.9 15.6 19.0 15.7 15.5 15.0 14.5

PAT Margin (%) 5.9 8.0 11.3 10.5 9.4 9.5 9.7

RONW (%) 35.5 42.4 16.5 18.2 15.3 16.1 15.6

ROCE (%) 34.8 43.7 24.8 24.2 21.9 23.1 23.4

Per Share Ratios

EPS (Rs.) 11.2 24.9 26.8 35.0 33.9 41.6 46.8

CEPS (Rs.) 12.5 27.8 28.9 37.6 38.1 46.4 51.8

BV Per Share (Rs.) 31.6 58.7 161.9 192.2 221.5 258.5 300.6

Valuation Ratios

P/E (x) - - - - 12.2 10.0 8.9

P/CEPS (x) - - - - 10.9 8.9 8.0

P/BV (x) - - - - 1.9 1.6 1.4

Capital Structure Ratios

Debt/Equity 0.8 0.8 0.2 0.2 0.1 0.1 0.0

Current Ratio 1.4 1.6 2.5 2.6 2.5 2.6 2.4

Turnover Ratios

Debtors turnover ratio 2.5 3.6 3.1 3.0 2.9 3.0 3.0

Inventory turnover ratio 4.2 6.1 5.8 7.0 7.0 7.0 7.1

Fixed Asset Turnover 11.8 11.6 12.8 9.6 5.1 6.3 7.1




Key Data (INR)

CMP 905

Target Price 1051

Key Data

Bloomberg Code VAMP IN

Reuters Code VOTL.BO

BSE Code 532757

NSE Code VOLTAMP

Face Value (INR) 10

Market Cap. (INR Mn.) 9318.5

52 Week High (INR) 1050

52 Week Low (INR) 265

Avg. Daily Volume (6m) 85663

Shareholding %

Promoters 46.1

FII 23.8

DII 10.0

Others 20.1

Total 100

Voltamp Transformers Ltd (VTL), established in 1963, manufactures power, distribution transformers and dry-type transformers. The company has manufacturing facilities in Vadodara and Vadadla with installed capacity of 9,000MVA and 4,000MVA respectively. The industrial segment accounts for ~80-90% of VTL’s client base. The company’s current order book stands at INR4,176.3 million, 0.8x TTM sales.

Product Range

The company manufactures power, distribution and dry type transformers. In the power transformer segment, VTL manufactures up to 100 MVA and 220 Kv class transformers. In dry type transformers, the company is a leader with a market share of 40%. It manufactures two types of dry transformers, vacuum resin impregnated up to 5 MVA, 11Kv and Cast resin up to 7.5MVA, 33 Kv, in technical collaboration with MORA (Germany) and HTT (Germany) respectively. Power transformers (49%) contribute to the majority of VTL’s revenue followed by distribution and dry-type transformers.

Product Portfolio

Power transformer 5MVA, 33KV to 100MVA, 220KV

Distribution 315KVA, 11KV to 5MVA, 33KV

Dry 63KVA, 11KV to 7.500 MVA, 33KV

Source: Company

Facilities

Particulars Annual Capacity (MVA) Capability

Vadodara 9,000 Produce and test up to 220 Kv and 100 MVA – primarily power

transformers

Vadadla 4,000 Manufacture Distribution and dry type transformers

Source: Company

Voltamp has two manufacturing units in Vadodara and Vadadla, Gujarat. Its Greenfield unit in Vadadla has an installed capacity of 4,000MVA and commenced operations in November 2009. As a result, its total annual capacity has increased to 13,000MVA, comprising 6,000MVA, 5,000MVA, and 2,000MVA of power, distribution and dry type transformer capacities respectively. The plant in Vadodara primarily manufactures power and distribution transformers, while the new facility at Vadadla will manufacture dry and distribution transformers.

B U YVoltamp Transformers Ltd

Revenue Break Up FY09

Distribution Transformer32%

Dry Transformer19%

Power Transformer49%

Source: Company

Capacity Break Up

Distribution TransformerDry Transformer Power Transformer

0%10%20%30%40%50%60%70%80%90%100%

FY05 FY06 FY07 FY08 FY09 FY10500 700 1000 1000 1000 2000

1700 2000 2700 3200 3200 5000

2300 2700 3500 4800 4800 6000

MVA



Order BookVTL’s order book grew from INR1,489 million in FY06 to INR4,176.3 million in January 2010. Current order book is ~0.8x TTM sales, providing revenue visibility for 6-9 months. Majority of the order backlog comprises power transformers (~51%) followed by distribution (26%) and dry transformers (23%).

Nature of contractsVTL primarily supplies to industrial clients, which contribute to ~80 to 90% of its total revenue. Industrial orders are at fixed prices and thus expose the company to movement in raw material prices. However, to protect itself from fluctuating raw material prices, VTL hedges with the help of forward contracts.

CapexThe company undertook capex of INR261.7 million for the 4,000MVA Greenfield facility in Vadadla. The project was primarily funded through internal accruals. It incurred expenditure of INR143.8 million in FY09 and the rest has been spent in FY10. The facility started operations in November 2009; with this, the company has a production capacity of 13,000MVA p.a. VTL has no further capex plans in the near term.

SWOT Analysis

Strength

Efficient working capital management and funding: Funding and working capital management are important factors for a transformer company. VTL primarily supplies to industrial clients, and as a result, working capital being blocked in the form of debtors is considerably low compared with peers. Debtor days for VTL are ~53 versus 75-120 days for peers.

FY09 Voltamp TRIL Bharat Bijlee EMCO Indo tech

Debtor days 52.4 119.8 108.7 162.6 76.6


The company also has INR1,352 million (FY09) as current investments and zero debt, which helps fund working capital requirement.

Diverse client baseVTL has a diverse industrial client base and it is not dependent on any particular industry. It supplies to various industries such as petrochemicals, metals, cement, real estate and others. No sector contributes more than 15% to its revenue. In FY09, its top 10 clients accounted for 39% of its revenue.

●

●

Source: Company

Order Book

INRMN

0500

100015002000250030003500400045005000

FY06 FY07 FY08 FY09 Jun 09 Oct 09 Jan 10

1489

35054072

2926

47504510

4176.3

Majority of orders comprises of orders from industrial users



Presence in dry type transformers: VTL is a leading manufacturer of dry transformers with a market share of ~40%. It manufactures vacuum resin impregnated dry and cast resin transformers. The segment contributes ~ 20% to revenue and grew at a CAGR of 29% (FY06-09). Dry transformers find application in high-rise buildings, hotels, stadiums, airports, and ports as they are non-inflammable, environment-friendly and maintenance-free. Strong order book: VTL has an order book of INR4,510 million (~0.9x TTM sales), which provides revenue visibility for 6-9 months.

WeaknessesSignificant capacity build-up to impact realization: Over the past five years, owing to the demand-supply mismatch, transformer manufacturers have recorded higher realization and profitability. However, significant capacity has been built up in the industry. Transformer capacity has increased to ~2,00,000MVA from ~1,25,000MVA in FY06. In addition, ~40,000MVA is expected to be operational by the end of the eleventh plan period. Thus, given this and the competition, realizations are expected to drop and in turn impact the growth of the company.Dependence on industrial clients: As VTL primarily supplies to industrial clients such as Reliance industries, Jindal steel, Infosys, Siemens, ABB, L&T, and Reliance Energy, it is exposed to the slowdown in investments in the private sector.Dependence on imports for CRGO (Cold Rolled Grain Oriented Steel): CRGO constitutes ~35% of the raw material cost. The component is not manufactured in India due to high manufacturing cost. Indian manufacturers including VTL are thus exposed to possible constraints on timely availability of CRGO.

Opportunities

Thrust of GOI on the power sector Capacity addition of 54,000MW is expected during the eleventh plan and ~1,00,000MW is planned for the twelfth plan periods. Moreover, initiatives such as development of a national grid along with power sector reforms such as APDRP and RGGVY have brought about significant opportunities for the industry and VTL.

Private sector investments: Investments in the private sector have recorded strong growth from 2006 onward. Projects under implementation have grown from INR4.1 trillion in Q2FY06 to 19.8 trillion in Q2 FY10. New project announcements have also registered healthy growth of 44% during the same period. Although the global financial crisis has slowed down project announcements, current announcements of INR17.2 trillion are significantly higher compared with the average of INR2.0 trillion during 2002-05.

●

●

●

●

●

●

●

Source: Company

Industry Wise Revenue Break Up

Metals11%

Power Projects10%

Cement9%Real estate

9%

SEBS8%

Infra project7%

Private utilities5%

Engg& Electricals5%

Auto & auto ancl4%

Others11% Petro chemicals

15%Chemicals

2%Sugar2%

Textile2%



Threats

Severe competition: MNCs such as ABB and Areva T&D have strong presence in the Indian market. In addition, 10-12 domestic manufacturers as well as un-organized players compete for orders from SEBs, utilities and industrial clients. This makes the market very competitive.

Financials

Net Sales

VTL’s net sales grew at a 46% CAGR to INR6,430.6 million in FY09, from INR2,487.9 million in FY06, driven by capacity addition and healthy realization on the back of rise in commodity prices.

●

Source: CMIE

Private Sector-Investments

Announcement Under Implementation

0

5

10

15

20

25

Dec-199

9Aug

-2000Dec-200

0Aug

-2001Dec-200

1Aug

-2002Dec-200

2Aug

-2003Dec-200

3Aug

-2004Dec-200

4Aug

-2005Dec-200

5Aug

-2006Dec-200

6Aug

-2007Dec-200

7Aug

-2008Dec-200

8Aug

-2009

INRtril

lion

Net Sales

Rs.mn

0

1000

2000

3000

4000

5000

6000

7000

8000


2,488

4,058

5,5536,431

5,250

6,5367,091


Capacity Production Utilization level

Capacity & Production Details


%

0

20

40

60

80

100

120

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

MVA

5,400 7,2

00 9,000

9,000

13,000

13,000

13,000

4503 618

8 7898 954

1

9624 10600 115

00

83 86 88

106

7482

88


Transformer Industry ACMIIL �0


In FY10E, we expect VTL’s net sales to dip INR5,250 million owing to fall in realizations. For FY11E and FY12E, we expect sales to increase to 6,536.3 million and INR 7,091.3 million respectively, backed by volume growth.

MarginsIn FY08 and FY09, VTL recorded exceptional margins in excess of 20% as the period was characterized by strong demand due to huge investments and liquidity in the economy. However, operating margins have dropped to the 19% in 9M FY10, as investments have slowed down. For FY11E and FY12E, we expect operating profit margins to remain low at 16.3% and 16% respectively.

We estimate PAT margin to fall to 13% and 12.8% in FY11E and FY12E respectively, owing to fall in operating margins and increase in depreciation cost.

Valuation and Recommendation

As significant portion of balance sheet constitutes of investments, we have used valued core (transformer) business separately and then added investments per share.

Looking at opportunities that lie in the power sector, investment announcements in private sectors, and a strong order book, we assign a P/E of 10x to Voltamp’s core (transformers) business earnings of INR 70 (FY12E) to arrive at value per share of INR 700.

Considering investments per share of INR351 (FY12E) and core business value of INR700/share, we initiate coverage on Voltamp Transformer Limited with a “BUY” recommendation and a price target of INR1051.

Particulars Adjusted PAT (FY12E)

Adjusted EPS (FY12E)

P/E multiple Segment value per share (INR)

Core business 707.9 70.0 10 700

Investments per share 351

Target Price 1051



MarginsPer

centag

e

OPM NPM

FY06 FY07 FY08 FY09 9M FY10 FY10E FY11E FY12E0

5

10

15

20

25

13.615.1

21.223.3

19.1 18.016.5 16.0

9.3 9.7

14.4

17.915.6 14.5

13.0 12.8



Financials

Profit & Loss Account INR Mn


Net Sales 2,487.9 4,058.0 5,553.5 6,430.6 5,249.6 6,536.3 7,091.3

Total Expenditure 2,148.6 3,444.5 4,374.9 4,932.1 4,304.7 5,457.8 5,956.7

Operating Profit 339.4 613.5 1,178.6 1,498.6 944.9 1,078.5 1,134.6

Other Income 42.8 48.7 107.6 239.7 240.0 265.0 300.0

EBIDTA 382.2 662.2 1,286.2 1,738.3 1,184.9 1,343.5 1,434.6

Depreciation 19.2 21.7 31.3 44.7 62.0 70.7 71.8

EBIT 363.0 640.5 1,254.8 1,693.6 1,123.0 1,272.8 1,362.8

Interest 10.1 12.6 5.0 4.7 6.2 6.2 6.2

PBT 352.9 627.9 1,249.8 1,689.0 1,116.8 1,266.6 1,356.6

Taxes 122.7 232.3 450.8 540.9 357.4 418.0 447.7

PAT 230.2 395.6 799.0 1,148.0 759.4 848.6 908.9

Adj PAT (Core Business) 202.3 364.9 730.3 985.1 596.2 671.1 707.9

Growth in Sales (%) 63.1 36.9 15.8 -18.4 24.5 8.5

Growth in Operating Profits (%) 80.8 92.1 27.1 -36.9 14.1 5.2

Growth in PAT (%) 71.8 102.0 43.7 -33.9 11.8 7.1

Growth in Adj PAT 80.4 100.1 34.9 -39.5 12.6 5.5

OPM (%) 13.6 15.1 21.2 23.3 18.0 16.5 16.0

PAT (%) 9.3 9.7 14.4 17.9 14.5 13.0 12.8


Balance Sheet INR Mn


Sources of Funds

Share Capital 101.2 101.2 101.2 101.2 101.2 101.2 101.2

Reserves and Surplus 593.5 894.4 1,545.5 2,545.6 3,187.6 3,918.9 4,710.5

Total Shareholders Funds 694.7 995.6 1,646.7 2,646.7 3,288.8 4,020.1 4,811.6

Total Loan Funds 189.5 9.0 10.4 0.0 10.0 10.0 10.0

Total Capital Employed 884.2 1,004.5 1,657.1 2,646.7 3,298.8 4,030.1 4,821.6

Application of Funds

Gross Block 177.4 215.3 324.5 370.7 632.4 642.4 652.4

Less: Accumulated Depreciation 96.6 116.4 147.0 190.3 252.3 322.9 394.7

Net Block 80.9 98.9 177.6 180.4 380.2 319.5 257.7

Capital Work in Progress 3.5 27.2 16.9 143.8 10.0 10.0 10.0

Investments 0.5 232.3 581.1 1,352.5 2,200.0 2,650.0 3,550.0

Net Current Assets 797.8 636.3 879.0 965.4 704.0 1,045.9 999.3

Differed Tax Assets 1.4 9.9 2.5 4.6 4.6 4.6 4.6

Total Assets 884.2 1,004.5 1,657.1 2,646.7 3,298.8 4,030.1 4,821.6




Cashflow Statement INR Mn


Pre tax profit 366.6 665.8 1,249.6 1,689.0 1,116.8 1,266.6 1,356.6

Add

Depreciation 19.2 21.7 31.3 44.7 62.0 70.7 71.8

Interest Exp 10.1 12.6 5.0 4.7 6.2 6.2 6.2

Profit before working capital changes 392.3 694.3 1,244.2 1,673.6 1,184.9 1,343.5 1,434.6

Working capital changes -255.0 76.0 -340.4 -93.9 285.0 -334.5 65.8

Less Taxes -151.9 -215.5 -447.7 -521.0 -357.4 -418.0 -447.7

Net Cash flow from operating activities -14.6 554.8 456.1 1,058.7 1,112.6 591.0 1,052.7

Net Cash flow in investment activities -26.3 -288.9 -406.4 -881.1 -975.4 -460.0 -910.0

Net Cash flow from financing activities 38.3 -198.9 -98.3 -163.0 -113.6 -123.6 -123.6

Net increase /(decrease) in cash -2.7 66.9 -48.6 14.5 23.7 7.4 19.1

Op. balance of cash and cash equivalents 30.5 27.8 94.7 46.1 60.6 84.3 91.8

Cl. balance of cash and cash equivalents 27.8 94.7 46.1 60.6 84.3 91.8 110.9


Ratios


Profitability Ratios

OPM (%) 13.6 15.1 21.2 23.3 18.0 16.5 16.0

PAT Margin (%) 9.3 9.7 14.4 17.9 14.5 13.0 12.8

RONW (%) 33.1 39.7 48.5 43.4 23.1 21.1 18.9

ROCE (%) 41.1 63.8 75.7 64.0 34.0 31.6 28.3

Adj RONW (%) 29.1 47.8 68.5 76.1 54.8 49.0 56.1

Adj ROCE (%) 35.1 75.0 106.2 112.0 79.8 72.6 83.1

Per Share Ratios

EPS (Rs.) 22.8 39.1 79.0 113.5 75.1 83.9 89.8

Adj EPS 20.0 36.1 72.2 97.4 58.9 66.3 70.0

CEPS (Rs.) 24.7 41.3 82.1 117.9 81.2 90.9 96.9

BV Per Share (Rs.) 68.7 98.4 162.8 261.6 325.1 397.4 475.6

Valuation Ratios

P/E (x) - - - - 12.1 10.8 10.1

P/CEPS (x) - - - - 11.1 10.0 9.3

P/BV (x) - - - - 2.8 2.3 1.9

Capital Structure Ratios

Debt/Equity 0.3 0.0 0.0 0.0 0.0 0.0 0.0

Current Ratio 3.4 1.9 2.0 2.4 2.2 2.1 2.2

Turnover Ratios

Debtors turnover ratio 6.5 10.7 9.2 7.0 6.9 8.5 7.9

Inventory turnover ratio 3.9 5.9 7.1 9.7 9.1 9.3 8.6

Fixed Asset Turnover 30.8 41.0 31.3 35.6 13.8 20.5 27.5




Annexure I - Transformers

For transmission and distribution networks to transfer large amounts of alternating current electricity over long distances with minimum losses and least cost, different voltage levels are required in various parts of networks. A generation unit produces electric current at a lower voltage, which has to be increased for efficient transmission and for reducing T&D losses during the transmission of electricity. The voltage again has to be lowered for the purpose of Sub transmission and Distribution of electricity for end use consumption. Transformers enable requisite changes in voltage. A transformer has two types of circuits: primary circuit and secondary circuit. The primary and secondary coils are wrapped around a core. A changing current in the first circuit (the primary) creates a changing magnetic field, which in turn induces a changing voltage in the second circuit (the secondary). This process is known as mutual induction. By adding a load to the secondary circuit, one can make current flow into the transformer, thus transferring energy from one circuit to the other The iron core forms a complete magnetic circuit and is made up of laminated strips of special steel having low hysteresis loss and high electrical resistivity. The lamination of the core reduces the eddy-current loss. For an average transformer used in a

power station, the conductor used for the windings consists of paper insulated copper bar or wire. In assembling the transformer, great care is taken to ensure windings are well insulated, both from the iron core and from each other. The basic construction of a core type transformer consist of an iron core, a cylinder of insulation followed by the low voltage winding, a further insulating cylinder and a high voltage winding. Clamps are used to hold the assembly in place. Raw material break upCopper: 30-35%MS Steel: 8-10%Transformer Oil: 5-10%Components & Others: 15-20%CRGO Steel: 30-35% (CRGO performs the function of generating magnetic flux in the transformers and is a key raw material besides copper. As CRGO steel is not manufactured domestically, it is imported directly from global majors like Thyssen of Germany, Kawasaki and Nippon Steel of Japan, AK Steel of USA or indirectly through Minerals and Metals Trading Corporation and local traders.)Type of transformer

Power transformers: Power Transformers are used for changing the voltage of electric supply from generators while connecting them to power evacuation system and further in transmission. They can be Step up (for increasing voltage levels) or Step down transformers (for reducing voltage levels) e.g. the power at generation level is of low voltage and has to be changed to higher voltage level for the purpose of transmission. They range from 11 kV to 765 kV and account for 70-75% of the total value of the transformer industry.Distribution transformers: Distribution Transformers are used for changing the voltage at various stages of sub-transmission and distribution - the power at transmission level is of higher voltage and has to be changed to lower voltage level for the purpose of sub transmission and distribution. Distribution transformers are used to transfer power from transmission to distribution points. They account for 25- 30% of the total value of the transformer industry.

●

●

ESSENTIALS OF A TRANSFORMER

MAGNETIC FLUX

SECONDARY WINDING

OUTPUT POWER=INPUT POWERMINUS LOSSES

OUTPUTAC

VOLTAGE

IRON CORE

INPUTPOWER

ACAPPLIEDVOLTAGE

PRIMARY WINDING



Annexure II - Transmission system in India

The transmission system in India operates at several voltage levels:

Extra high voltage: High voltage direct current (HVDC), 765 kV, 400 kV, 220 kV and 132 kV

High tension: 66kV, 33 kV, 11kV

Low tension : 6.6 kV, 3.3 kV, 1.1 kV, 220 V

●

●

●

Annexure III – TRIL Client List

Utilities Industrial clients:

Transmission Corp of Andhra Pradesh Ltd LNT

Maharashtra State Electricity Transmission Co Seimens

Gujarat Energy Transmission Corporation Ltd Rohit Ferro-Tech Ltd

Uttar Pradesh Corporation Suzlon Energy

Tamil Nadu Electricity Board Monnet Ispat & Industries Ltd

Kerala State Electricity Board

NTPC

Annexure IV – Price Variation Formulae

Assuming delivery is in the month of December

Assuming order was tender in the month of May

Original price (Po) 100.00

Raw material Prices as of Price Weight

Copper August - 4 M prior to delivery C 125 0.23 0.29

March - 2 M prior to Tender Co 100

CRGO Sept - 3 M prior to delivery ES 110 0.28 0.31

April - 1 M prior to Tender ESo 100

WPI - Iron & steel Saturday Sept - 3 M prior to Delivery IS 105 0.07 0.07

Saturday Feb - 3 M prior to Tender ISo 100

Insulation Material Sept - 3 M prior to delivery IM 115 0.07 0.08

April - 1 M prior to Tender IMo 100

Transformer Oil Oct- 2M prior to delivery TO 108 0.07 0.08

March - 2M prior to Tender TOo 100

CPI Industrial worker Index Sept- 3M prior to delivery W 105 0.15 0.16

Feb - 3M prior to Tender Wo 100

0.13 0.13

Revised price 111.3

Dry type transformers: Dry type transformers can either be a power transformer, distribution transformer or an industrial transformer. They are used in places where there are high chances of a fire breaking out. As there is no oil used in the transformer, the fire risk is considerably reduced in this type of transformers. “Dry type” simply means it is cooled by normal air ventilation. The dry type transformer does not require a liquid such as oil or any other liquid to cool the electrical core and coils.

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Disclaimer:

This report is based on information that we consider reliable, but we do not represent that it is accurate or complete and it should not be relied upon such. ACMIIL or

any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information

contained in the report. ACMIIL and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report.

To enhance transparency we have incorporated a Disclosure of Interest Statement in this document. This should however not be treated as endorsement of the views

expressed in the report

Disclosure of Interest Transformers & Rectifiers India Ltd Voltamp Transformers Ltd

1. Analyst ownership of the stock NO NO

2. Broking Relationship with the company covered NO NO

3. Investment Banking relationship with the company covered NO NO

4. Discretionary Portfolio Management Services NO NO

This document has been prepared by the Research Desk of Asit C Mehta Investment Interrmediates Ltd. and is meant for use of the recipient only and is not for

circulation. This document is not to be reported or copied or made available to others. It should not be considered as an offer to sell or a solicitation to buy any security.

The information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be relied upon as such. We

may from time to time have positions in and buy and sell securities referred to herein.

Notes:

Institutional Sales:

Ravindra Nath, Tel: +91 22 2858 3400

Kirti Bagri, Tel: +91 22 2858 3731

Himanshu Varia, Tel: +91 22 2858 3732

Email: [email protected]

Institutional Dealing:

Email: [email protected]

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