VBC Group Long Term Buy Call: Abhishek Jain, StocksIdea.com
The acronym “VBC” stands for Vizag Bottling Company. The VBC group, a reputed industrial house of Andhra Pradesh with more than three decades standing, is a professionally managed conglomerate. In the year 1967, VBC Group started as a partnership firm in the name of Vizag Bottling Company to carry on the business of bottling and distribution of soft drinks from Visakhapatnam under a franchise agreement with Parle Exports Limited, Mumbai.
With a view to step into power generation, coal washeries business and to augment equity needs of power projects, the chemical division was hived off in March, 2000, as a pert of business restructure & re-engineering. The success of bottling business made the company not only to expand the bottling activity but also to diversify into new areas of business, i.e., Deep Sea Fishing, Marine Food Processing, Marine Food Exports, Laminated Jute Bags, Manufacture of Ferro Alloys, etc.
The Group has inculcated quality product manufacture as its way of life and worked on the motto to attain leadership in every area of activity of its domain. VBC Ferro Alloys Limited (VBCFAL) was promoted by a group of technocrats & entrepreneurs led by Dr. M V V S Murthi and Shri J S Krishna Murthy. The company was incorporated under the Companies Act, 1956 on 3rd October.
Products & services:
The main Business of V B C Ferro Alloys is Ferro silicon, ferrochrome/ chargechrome and related job work. Company’s plants are located in Rudraram ( Medak, AP). Steel Industry is witnessing stability, driven by demand from China & India. The Indian demand is expected to be driven by increase spending on infrastructure sector. All these factors offer ample scope for the growth of Indian Ferro Alloy Industry in the coming years.
Initially VBCFAL set up a plant for production of 10,000 TPA of Ferro Silicon at Rudraram Villate, Medak District of Andhra Pradesh at a cost of Rs.5.92 crores. This unit went into commercial production in April, 1985.
The Unit has several locational advantages. It is close to 132 KVA power line of AP Transco, adequate water supply is available from Manjeera Reservoir and underground source, the raw material required are available within a radius of 200/250 KM.
In September, 1989, VBCFAL formulated an expansion scheme to increase to capacity of Ferro Silicon from 10,000 TPA to 15,000 TPA and further installed the second furnace in 1992 for production of Ferro Chrome with a production capacity of 22,000 TPA. Company’s Power Project, Konaseema EPS Oakwell Power Limited (KEOPL), a special purpose company incorporated to build, own and operate the natural gas based combined cycle power plant with a capacity of 445 MW in the State of Andhra.
Company is completely gearing up to leverage on the opportunity in the Ferro Alloys industry thrown open by rising World Steel Production and even on the increasing capacity in the Indian Market. Its diversification into Power Generation is a major step as it would not only improve its cost competitiveness in its core business but would also enable it to capitalize on the opportunity of the Power Sector Reforms. At current market price, stock is trading at 7.8 P/E multiple of its FY2011 estimated earnings. We recommend investors to “BUY” “VBC Ferro Alloys” with medium to long term investment prospective.