P R I C O L – A TURNAROUND SCRIP

PRICOL predominantly operates in the Motor Vehicle parts and accessories sector.

The company has seven plants spread across India as under:

• Two plants in Uttarakhand
• One plant in Gurgaon
• One plant in Pune and
• Three plants in Tamil Nadu

The company manufactures instrument clusters, speed sensors, fuel level sensors, vehicle security systems etc. These parts/components/accessories are supplied to the units of companies which manufacture motor cycles, scooters, 3-wheelers, cars, SUV’s, trucks, tractors and construction equipments.

There were major labour problems in PRICOL’s plant in Tamil Nadu some time back but now things are normal. All companies based in Tamil Nadu have to live with this one problem whereby the increasing number of disputes in major companies is due to the fight among the unions to show their supremacy to represent workers.

The Balance Sheet of PRICOL

PRICOL has an equity base of Rs.9 crores and reserves are 18.7 times of equity which stands at Rs.169.11 crores. The promoters stake in the company stands at 35.8 per cent.

The company’s Debt Equity ratio which was 1.98 in fiscal end 2008-09 now stands reduced to 1.43 as on 31 March 2010.

The total CashBank balance coupled with near cash Investments stood at Rs.37 crores as of 31 March 2010.

The company’s working capital is good especially if we consider that roughly 25 per cent of sales are outstanding/collectible at any given point of time.

The P&L a/c of PRICOL

For the I Q of 2010-11 Net Sales/Income from operations was Rs.189 crores as compared to I Q of 2009-10 which stood at Rs.164 crores, a top line growth of 15.2 per cent. PAT for I Q of 2010-11 was Rs. 9.30 crores as against Net Loss of Rs. 5.31 crores for corresponding quarter of previous fiscal.

For the fiscal period 2009-10 Net Sales/Income from operations was Rs. 742 crores as compared to 2008-09 which stood at Rs. 614 crores, a top line growth of 20.8 per cent.

Exports represented roughly 22.47 per cent in 2008-09 whereas it slipped to 14.69 per cent in 2009-10. The lower dependence on export revenue is appreciated for obvious reasons.

PAT for fiscal 2009-10 was Rs.25.48 crores as against Net Loss of Rs.30 crores during fiscal 2008-09

The Face Value is Rs.1/= and the 52 week range is Rs.33.95 – 10.26 and the shares of PRICOL are currently trading at Rs. 29.80 [ 27 July, 10 a.m. ] and the PE is 11.71.

Conclusion: Since the two wheeler and four wheeler industry is doing well and because PRICOL’s products have an established presence both in India as well as overseas markets, it is good medium term bet that may give reasonably good returns.By the way, auto industry recorded a growth of 25 per cent in 2009-10 over previous year. Expect this growth trend to continue long into the future at least for the next 5 to 6 years considering the strong demographics of India. Moreover, the company has just turned around and the only area of concern is the fluid labour situation in Tamil Nadu as briefly explained above. Those who love to embrace risks may well go ahead and embrace PRICOL and hold on to it for the medium term.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd