[T.S.R:16153] Hira Ferro Alloys

Investment Rationale:

•       Financials showing traction: The topline grew from Rs.266mn in Q1,
FY10 to Rs.415 mn in Q1, FY11, an increase of 56%. EBITDA grew y-o-y
by 26% from Rs.81 mn in Q1, FY10 to Rs.102 mn in Q1, FY11. Bottom line
came in strong with 85% increase from Rs.42 mn in Q1, FY10 to Rs.78 mn
in Q1, FY11.

•       Ferro alloy prices trending upwards: Ferro alloy prices are on a
rise across the globe. Increased steel capacity utilization in the
European region is supporting higher prices of ferro alloys. Some
European steel mills are operating at 80-100% utilization levels. Most
ferro alloy manufacturers are contemplating to increase product prices
in November.

•       Chinese emission curbs supporting silico manganese prices:
Silico-manganese prices have remained buoyant in October 2010 and have
been supported by continuous rise in silicon metal prices, mainly due
to curb on production of Chinese smelters to meet emission reduction
objectives.

•       Foray into power segment: The company is already engaged in the
generation of captive power. It also sells power in the short term
market through merchant sale with view to optimize revenue and
profitability. Further, the company is foraying into wind power. In
2010, 30% revenues came from the power segment.

•       Robust promoter holding: The promoter holding in the company stood
at 72.59% as of September 2010. The high promoter holding shows the
confidence of the promoter in the business. Also, it provides them
space to raise capital through equity route to fund future projects.

•       Backed by strong business house: Hira Ferro Alloys Ltd. is part of
the Hira group of industries, which is a business conglomerate. Some
of the group companies like Godawari Power and Ispat Ltd. are already
respectable players in their sector.

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