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Transformers and Rectifiers – Subscribe

December 11, 2007

Transformers and Rectifiers Ltd (TRL) is one of the major players in the Indian market manufacturing power generation transformers, transmission and distribution (T&D) transformers, industrial transformers and a range of specialty transformers. TRL is setting up a new plant in Moraiya, near Ahmedabad with an installed capacity of ~16,000MVA. The plant is expected to come on stream during 2008-2009.

TRL enjoys a Niche position in the industry as one of the largest manufacturers of furnace transformers. Designing and engineering forms a critical element of transformer making process. The company has a strong emphasis on designing and is one of the few manufacturers having the capability to design entire range of transformers. The company enjoys a significant cost advantage on several fronts. The design and engineering capabilities have been developed indigenously and in-house, without third party collaboration or assistance.

The company has an order backlog of Rs360 crore which is 1.6x FY2007 consolidated revenues. Out of the current orders, 110-crore-worth of orders are for industrial clients and the remaining are for utility companies.

Current IPO Offering:
Price band : Rs425-465
Retail portion : 8.53 lakh shares

Recommendation:
Annualising H1FY2008 earnings, the stock is being offered to public at the price/earning (P/E) ratio of 21.6x-23.6x its consolidated annualised fully diluted post issue earnings per share (EPS). This is comparable to Indo Tech Transformer and is available at a discount to Bharat Bijlee and Emco.

The retail portion of the issue will be heavily subscribed. Investors who consider themselves lucky for allotment in Lottery can apply as the GREY MARKET PREMIUM is already Rs 400. Check back on the details of Allotment status as well as listing information.

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