PICK OF THE WEEK:

Marson’s Ltd

BSE Code: 517467

CMP: Rs.17

Book Value: Rs.14.20

EPS: Rs.1.34

Market Cap: Rs.34 Cr

Introduction: Marson’s Ltd was originally incorporated as a Private Limited Company on 26.08.1976 as Marson's Electricals Private Limited. It took over the proprietorship concern, Marson's on 17.12.77, which was engaged in the manufacturing of transformers of different classes and ratings since 1957. It became a deemed Public Company under Section 43A (1A) of the companies Act, 1956 on 21.07.1981. Pursuant to a Resolution passed at the Extra Ordinary General Meeting of the members of the Company held on 26.12.1990 the name of the Company was changed to Marson's Limited.

The company currently manufactures Power and Distribution Transformers ranging from 10 KVA to 100 MVA 132 KV Class, Furnace transformer, Dry Type Transformers and various types of special application Transformers. It has recently upgraded its facilities to manufacture power transformers up to 160 MVA to 220 KV Class. A new facility to manufacture EHV Power Transformers up to 315 MVA 400 KV class is under implementation.

These transformers are mainly supplied to CESC Ltd, Coal India Ltd, and Power Projects like Santaldihi, Bandel, Kolaghat and to various State Electricity Boards including Rajasthan, U.P., West Bengal, Assam etc. on a made-to order basis. It is also engaged in manufacturing Current Transformers /Potential Transformers CT/PT) of 66 KV class. It has manufactured and supplied a current transformer of 230 KV class specially designed for Jadavpur University at Kolkata. Transformers produced by Marson's are in operation for years and are used in such sectors as Defence, Railways, Tea Estate, Cement Mills, Steel rolling mills apart from electricity Boards, etc. for power transmission and distribution.

MARSONS, is an ISO 9001:2008 company, committed to give the best and most reliable transformers over last five decades. It has constantly updated its products with the latest development and innovation in the industry.

Today it can boast of having one the best manufacturing facilities in the country. It is amongst the first to set up impulse testing laboratory and autoclave (vacuum heating system) way back in 1995-96. Its impulse laboratory is equipped with 1600 KV 80 KJ impulse generator imported from Haefely Trench of Switzerland the world leaders.

Its expertise encompasses Design, Development, Manufacture and Testing of Power & Distribution Transformers. It’s Transformers of various rating, which includes 50 MVA 132 KV Class, have been successfully type tested at CPRI in Bhopal and Bangalore. It has supplied more than 150,000 Transformers across India during the last five decades.

Shareholding Pattern: The promoters hold 44.37% while the non-institutions hold 55.63%. The corporate bodies hold 18.88 % of the shares of the company.

Shareholding belonging to the category "Public" and holding more than 1% of the Total No.of Shares
Sl. No.	Name of the Shareholder	No. of Shares	Shares as % of Total No. of Shares
1	Palak Sarees Trading Pvt Ltd	350,000	1.75
2	Munoth Capital Market Ltd	211,908	1.06
3	Sargam Vincom Pvt. Ltd	250,000	1.25
4	Muskan Dealers Pvt. Ltd	250,000	1.25
5	Snowell Commercial Pvt. Ltd	250,000	1.25
6	Sanmukh Vincom Pvt. Ltd	250,000	1.25
7	Upturn Securities Pvt. Ltd	315,328	1.58
	Total	1,877,236	9.39

Financials: For FY10, the company came out with good set of numbers. The total income of the company for FY10 came out to be Rs.78.47 Cr as against Rs.44.05 Cr in the same period previous year. The PBDT of the company came out as Rs.4.59 Cr as against Rs.2.03 Cr in the same period previous year. The PBT of the company for FY11 jumped nearly 180% to clock Rs.3.34 Cr as against Rs.1.19 Cr in the same period previous year.

The net profit of the company for FY11 came out to be Rs.2.49 Cr as against a loss of Rs.74 lakhs in the same period previous year. The EPS of the company for FY10 came out to be Rs.1.38 as against negative EPS of Re.0.08. Moreover, both the net and operating profits margins increased considerably in FY10 as against FY09.

Triggers:

• The company has upgraded its facility for manufacturing of transformers upto 160 MVA 220 KV Class from 100 MVA 132 KV Class. A new facility to manufacture EHV power Transformers up to 315 MVA 400 KV Class is under implementation.
• The Scheme of Amalgamation of M/s. Marsons Transformers Limited with the Company was approved by the Hon’ble High Court at Calcutta and 31567900 equity shares of Rs.2 each of the Company were allotted on August 01, 2008 consequent to such amalgamation. This has increased promoters stake in the Co. to 46.8% from just 16%, a couple of years back.
• Company received allotment advice dated, April 09, 2009 from Advance Power Technologies Ltd for allotment of 5,00,000 equity shares of Rs.10 each on March 31, 2009 and accordingly the Company's investment in that Company has gone upto 53.33% and accordingly henceforth Advance Power Technologies Ltd has become a subsidiary Company of the Company.
• Marsons Ltd ealier informed that 20,00,000 Equity Shares of Rs.10 each have been allotted as follows on Private Placement Basis at a Premium of Rs.14 each to both promoters and non-promoters.
• Marsons Ltd also earlier informed that it has entered into strategic agreement for acquisition of 100% Equity in a wall established European company manufacturing power transformers upto 132 KV Class for a consideration of GBP 6.1 million subject to due diligence.
• Marsons Ltd has in the month of May, 2010, bagged prestigious order worth Rs.60 Crore (approx) from RRVPNL for supply of 32 nos. 25 MVA 132/33 KV Power Transformers.
• Though the current year is more challenging in terms of managing bottomline as industry is having sizeable unutilized capacity, however, the silver lining is revival and pickup of growth rate in manufacturing sector and revival of corporate capex and large number of projects in power and infrastructure projects started moving. Barring unforeseen circumstances, the Company expects to increase its volume of business in the current year. The company hopes to maintain close monitoring of order execution with tight control on costs and reviving major orders which came under hold in the previous year.
• The objective of government, “Power for all” by 2012 has added impetus to growth of power equipment manufacturers. Government has planned an ambitious target of additional power generation capacity of 80,000 MW in 11th Five year plan leading to very bright future for all power equipment manufacturers. As the Company is dominant supplier to almost all state electricity boards of the country, thus sees a bright future ahead.
• An important factor which needs to be mentioned here is that, a high rating transformer has the life of about 20-30 years and small rating transformers’ life is 5 years. High rating transformers which were installed during IVth and Vth plans are due for replacement. Hence the Company will have the benefit of overall growth of power sector. Moreover, A new facility to manufacture EHV Power Transformers up to 315 MVA 400 KV class is under implementation, which will further add to the top and bottomlines of the company.

Chart-check and Conclusion: From the charts it has been found that the scrip has very good support around Rs.16.80, which will be difficult to break on the downside unless some major negative event occurs. Bollinger Bands, MACD, Stochastic, Williams %R, etc are all in buy mode. The scrip has more or less formed a bottom and hence if the Q1FY11 results are good, then the scrip would shoot up.

Therefore, looking at the points mentioned above we can safely conclude that one can buy the shares of the company at the CMP of Rs.17 for a short term target of Rs.22-23. The developments mentioned above have a positive bearing on the company’s fundamentals. Allotment of shares to promoters is always a positive sign, and their stake has increased to 46.8%, which is quite good. Also with the slew of power projects lined up, transformers will be great demand. But for very short term play please keep a SL of Rs.15.80.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.

The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.

Note: The stock was recommended to the Paid Groups on 15th August, 2010.