THEJO ENGINEERING LIMITED – INITIAL PUBLIC OFFERING
Issue – Overview
Thejo is proposing to raise `21 crore through an Initial Public Offering and list its shares on EMERGE, the
SME platform of the National Stock Exchange. The price band per share of face value `10 is `402 to
`430.
CRISIL has assigned a CRISIL SME fundamental grade of ‘SME 5/5’ to the proposed IPO of Thejo
Engineering Ltd. This indicates that the fundamentals of the IPO are excellent as compared to other
SMEs in India.
Background of the Company
• Thejo is a light engineering Company based in Chennai providing Engineering Solutions for Bulk
Material Handling, Mineral Processing and Corrosion Protection to the Core Sector Industries like
mining, power, steel, cement, ports, fertilizers etc.
• The services offered by the Company 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 2011, products and services contributed 55 % and 38% of its total income respectively. The
remaining 7% of income was contributed by trading activities.
• Currently, Thejo is one of the few companies in the sub continent offering manufacturing, marketing
and servicing activities under one roof.
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• The Company has 4 manufacturing units, all of which are located near Chennai. It also has a pan
India presence through 11 branch offices and 36 site offices.
• International presence through partnerships and distribution network extends across Australia,
Kingdom of Saudi Arabia, the USA, Germany, Chile, Brazil and Ghana.
Strengths of the Company
• Only Organized player in both the products’ and services’ space – Thejo is the only organized
player in both the products’ and services’ space, which allows it to cross sell its offerings. This also
allows the Company to procure the products used in the services’ business from its products
division.
• Established brand name and reputation – Thejo has been in the same line of business since 1976,
and has established a strong brand name and reputation. The Company has also developed strong
customer relationships leading to repeat orders.
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• Financial Strength – The Company, as on December 31, 2011 had a Debt / Equity ratio of 1.01,
which indicates strong financials for a light engineering Company. This would allow the Company to
take on more debt in the future to fuel its growth plans. The Company has been rated “SE1A”, in a
NSIC‐CRISIL rating exercise, indicating “Highest Performance Capability and Highest Financial
Strength”.
• Professional Management – The Company is run by a professional management team, with
members from varied backgrounds such as manufacturing, industry and banking.
• Corporate Governance – The Company has a nine member Board of Directors, of which five
members are independent directors of high repute.
Strategies
Diversify Geographically –
• Australia – With the incorporation Thejo Australia Pty Ltd, a subsidiary in Australia, Thejo is well
poised to enter the services business. This company will focus on offering belt conveyor related
maintenance services and rubber lining activities, initially to clients in Western Australia. The
company also intends to sell products for bulk material handling and corrosion protection under
the THEJO brand.
• Africa – The Company is also keen to establish a branch/subsidiary in western Africa. It has
secured orders for mill liners from mines in Ghana. It is exploring other such opportunities and
intends to engage agents to market products under the THEJO brand in the Western African
countries such as Ghana, Ivory Coast, Burkina Faso, Togo etc.
• Saudi Arabia – Thejo has entered into a joint venture with Hatcon LLC. The presence of a wide
range of industries and the fact that Saudi Arabia is one of the largest producers of oil, justifies
the establishment of a service center.
Improving Domestic Reach ‐ The domestic market has shown increased growth with many projects
coming up in mining, steel, power and ports sector. The Company has segmented the domestic market
into zones with each zone having a number of business development managers with well demarcated
territory. These managers are supported by product managers, who help in understanding client
requirements and oversee execution into desired products.
Polyurethane Division – The Company was initially importing polyurethane blades for use in its belt
cleaners, screens, liners, pump parts, mineral processing equipments and certain customized
polyurethane products. Due to sustained increase in demand, it is in the process of setting up a plant to
manufacture the blades.
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Lining Plant – The increased number of orders for lining products has necessitated the establishment of
a separate lining division. A lining plant is being set‐up with increased automation and is expected to
handle large number of orders with enhanced logistics capabilities.
Financial Overview
FY10 FY11 FY12 (Dec’ 2011)
Net Sales 64.32 95.22 78.18
EBITDA 7.57 10.03 10.16
OPM (%) 11.77% 10.54% 13.00%
Profit Before Tax 3.51 5.78 6.44
Profit After Tax 2.27 3.83 4.34
NPM (%) 3.53% 4.02% 5.55%
Share Capital 1.18 1.18 1.18
Reserves & Surplus 12.73 16.08 20.45
Tangible Net Worth 13.91 17.26 21.63
Secured Loans 19.85 19.53 21.94
Debt/Equity 1.43 1.13 1.01
Pricing
The EPS for nine month period ended December 31, 2011 is Rs.36.66. The P/E multiple at this EPS works
out to 11.73x and 10.93x at the higher end and lower end of the price band respectively. The P/E
multiple on projected FY12 numbers works out to 9.00x and 8.41x at the higher end and lower end of
the price band respectively.
Investors
SIDBI Venture Capital Limited (SVCL) has agreed to participate in the IPO and also agreed to act as the
nominated investor. The merchant banker is currently in discussions with other reputed institutional
investors to participate in the issue.
Market making
The merchant banker is required to compulsorily market make issue for a period of 3 years from the
date of listing. The nominated investor will provide support to the market maker for market making.
Market making will ensure liquidity for the stock.
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