EPC INDUSTRIE LTD - UPDATE

EPC INDUSTRIE is one stock recommended more than once in this blog. In my initial recommendation @ Rs.61 itself ,I mentioned the possibility of a take over by some bigger players in future.( Read Initial Recommendation HERE) As expected, later this company acquired by Mahindra ( M&M)  Group.

Later in my second recommendation on this same company @ Rs.141 , ( LINK) I have mentioned the possibility for a consolidation of all Agri related  business of Mahindra group  under the fold of a single company.

Now ,after three years of acquisition of  EPC  ,Mahindra Group expressed  their intention to consolidate all its Agri-business units into a single entity. As a listed company , I believe it will happen under the fold of EPC Industrie .Mahindra's one of Agri Business units  named Mahindra ShubhLabh Services Ltd is the largest exporter of grapes .It also joint hands with  Belgian company 'Univeg' for developing a fresh fruit supply chain.This division also planning big  expansion in seed business and recently formed a joint venture with  Holland based HZPC to provide seed potatoes.


I believe , post consolidation , this company will emerge as an integrated farming company and results another blue chip from Mahindra group in the years to come.

Strongly recommending to HOLD and those with some risk appetite may even buy at current level for a  2+ year HOLD .Currently stock is trading around Rs.200.

Read Latest news below

Mahindra Group plans to consolidate all its agri-business units

Link to Company Website HERE 

Disc: I have vested interest in EPC Ind

EPC INDUSTRIE' LTD - REVIEW

This stock initially recommended ( HERE)  during August 2010 around Rs.61.At that time  I mentioned EPC as a potential take over target. As expected, one of India’s largest business group – Mahindra  and Mahindra (M&M) later took over this company  in February 2011.It is two year now and let us re look at the initiatives taken by the new management and its  future prospects.

                                                                            First of all , it was  two bad years for micro irrigation companies due to delay in releasing subsidies by various state governments.This resulted in serious working capital issues to companies operating in this sector.Mounting debt was the end result and due to this reason market cap of Industry leader Jain Irrigation nosedives.Earlier most of the  companies in this sector was following a business model which put the burden and responsibility of collecting subsidies from governments on the shoulders of companies itself and not on the farmers . They realized the risk of this business model  only after frequent cases of delay in the releasing  of subsidies in recent times.Now it is a transformation phase of this business model and company’s are now only helping the farmers and it is their responsibility to collect subsidy from the state governments.Normally ,as a result  of this change in strategy  ,sales  growth of  MIS shows lower growth during this transformation phase .Now most of the companies including Jain Irrigation is adopting this new  model and expecting significant improvement in business in another few quarters once this shift completes.

                                                                                         Being a pioneer in farming related business ,Mahindra’s took a careful step and begin with a prudent decision to start with the new model.Initially  ,to strengthen the capital base and support working capital requirements M&M infused further funds into EPC through a rights issue priced  @ Rs.40. Through this rights they hiked their stake from 38 % to 55 % ( M&M subscribed the unsubscribed portion of Schroder Credit Renaissance Fund ,as part of take over agreement)

                                                            Then ,M&M formed a new board and appointed well experienced executives to lead the company .Mr Ashok Sharma appointed as the ED and CEO of EPC .He is also serving as Chief Executive -Agri and Allied Business of M&M,Mr Subhash Modak as COO ( Vice president  M&M) and Mr Pavan Deolia as Head Sales & Marketing (General Manager- M&M ltd)

                                                               Under this new leadership ,company get a new direction and started  fresh initiatives to become a leader in agri space.First of all ,EPC amended  its object clause of Memorandum of Association to enable it to diversify into other agri related areas like seeds, fertilizers, pesticides, agri chemicals, tractors implements, pumps, greenhouses, power, fruits and vegetables, meat and poultry, dairy, aquaculture, marine culture, grains and fast moving consumer goods..etc.

                                                                                       Further the company increased its offering by adding new products in its portfolio including  pumps and new models of micro irrigation systems.This will help EPC to become a one stop shop for all MIS needs .Company started strengthening  its marketing network by adding dealers in un represented areas.

One drawback of this company during the erstwhile management was its inability to offer complete solutions rather than just selling MIS products.But company now started Agronomy Support Services  including Educating farmers in the areas of Introduction of new crops,Crop selection,pest and weed management ..etc. Agri Helpline is another new initiative by EPC for farmers .Farmers can call or mail for clearing any agri related doubts .If necessary, company’s expert will personally visit the farm and give advices free of cost. All these efforts will ensure a close relation with farming community and increase the brand value of EPC as a complete farming solutions provider.

New Initiatives

EPC recently started an agri show room ( a  one stop shop for all agro products and solutions ) in Buldhana district of Maharashtra.I believe it is only a first step of a long journey and company will start many such shops at various parts of India once they started own production of other items like Seeds,agri chemicals,green house accessories..etc.

Another most important development in the history of EPC is its recent tie-up with State Bank of India( SBI) .Last week ,company entered into tie-up with SBI  to finance farmers for micro irrigation systems.Considering the vast network of SBI even in the nuck and corner of India ,clinching such an arrangement with India’s biggest bank  is a very important development for EPC .For financing farmers ,even some market leaders are forced to start financing facilities for their own  which need additional capital end extra struss in their balance sheet .I strongly believe such a an arrangement materialized only because of the goodwill and credibility of Mahindra Group.( Read more details about this event HERE) 

Financial Performance and Change in Share Holding 

Even after following a conservative business model ,company could improve its business.During the latest quarter ,EPC reported a Sales of Rs.50 Cr ( Rs.40 Cr in same period last year) and a net profit of Rs.2.70 Cr (Rs.1.98 Cr) .This may not be a big figure but we should realise it is just a beginning for the new management and the initiatives they are taking now will need some time to deliver in its full potential. Change in share holding during the last one year is another point to note. Earlier about 34 % stake was held by Credit Renaissance Fund. ( who took preferential allotment to pump money for working capital during the time of old management).Now they exited completely and these shares are mopped up by reputed Institutional and Individual investors including Morgan Stanley,Reliance Capital,SCIL Ventures..etc.This means, exit of 35 % stake by one stake holder not increased  the level of floating stock in market .Another  source of supply coming to the market is from the remaining stake held by the old promoters .I strongly feel ,their exit is part of the take over  agreement  with M&M .At the end of December quarter old promoters (  Trenton Investments Co Pvt Ltd ) holding  934985 shares .Tracking the trend of trading of this stock for the past many years , I believe they are selling around Rs.140 and this is the only source of major supply at this point . Their holding may  be reduced  further due to selling in January and February.

                                                                           As I mentioned above about 85 % of shares are held by promoters and institutions in this company .Management is taking careful steps to develop EPC as a full fledged farming solution provider.At present , sales of micro irrigation systems are promoted by producers and central  and various states and government .I believe this scenario will change in another few years and due to scarcity of water and introduction of modern farming techniques MIS will be a necessity for farming and farmers itself will demand it .If everything goes well ,with an experienced management  with vision and ability to tap opportunities  , I strongly feel EPC will evolve as a front runner in Indian Agri space and become  a feather in the cap of Mahindra Group in another few years.CMP of EPC Rs.143 /-

Stock is expected to move to another range once the supply from old promoters absorbed.Hence recommending to tightly HOLD it for long term .

LINK TO VIDEO PRESENTATION BY CEO HERE

LINK TO COMPANY’S  NEW  WEBSITE HERE

EPC INDUSTRIE' LTD - UPDATE

I have recommended this Mahindra Group company at least five times in the past .In a big positive development ,today company decided to amend its object clause of Memorandum of Association to enable it to diversify into other agri related areas like seeds, fertilizers, pesticides, agri chemicals, tractors implements, pumps, greenhouses, power, fruits and vegetables, meat and poultry, dairy, aquaculture, marine culture, grains and fast moving consumer goods. Recently the top officials of Mahindra indicated that their next important concentration will be in sun rise industries like Agriculture .I believe EPC Industrie' will be a key beneficiary of their decision and their latest plan to amend the object clause is the first step in this direction.

Happy investing ...

Discl : I have vested interest in EPC

EPC INDUSTRIE Ltd - RESULT UPDATE

For the latest March quarter , company posted a turnover of  Rs.39 Cr v/s Rs.20 Cr and a net profit of Rs.2.76 Cr v/s Rs.19 Lakhs .In 2011-12 full year company recorded a sale of Rs.125 Cr v/s Rs.87 Cr and a net profit of Rs.6.66 Cr v/s Rs.1.43 Cr .Today EPC quoted Ex-Rights basis @ Rs.115/- .Recommending to HOLD for long term.

EPC INDUSTRIE - RIGHTS ISSUE UPDATE

EPC INDUSTRIE LTD is one of my recommendation @ Rs.61/- ( For Old Posing Click HERE) which is now trading at Rs.150/-.Now company declared the terms of much awaited Rights Issue as follows:

- Ratio: 3 (three) new Equity Shares for every 5 (Five) existing Equity Shares

- Issue price per Equity Share: Rs. 40/- per share

- Face value: Rs. 10/- per share

- Premium: Rs. 30/- per share

- Size of the issue: Rs. 41.43 Crore.


Subscribe the rights which is offered at substantial discount to current Market Price and HOLD this M& M group company  for further gains in long term

EPC INDUSTRIE - RESULT UPDATE

The Mahindra & Mahindra Controlled EPC INDUSTRIE posted excellent result for the quarter ended December 2011 , after the closure of market hours. Company posted a turnover of Rs.40 Cr v/s Rs.24 Cr and a net profit of Rs.2 Cr v/s Rs.30 Lac ( Up 560 % from same period last year)  in this quarter. This is the first result from the company after the management control is taken over by M & M.

Recommending a HOLD at Current market Price.

For old postings on EPC  click HERE and HERE

EPC INDUSTRIES - M & M TO PICK 38 % STAKE

EPC Industrie is one of our past recommendation @ Rs.61 (Old Report HERE) . Yesterday company announced the entry of Mahindra and Mahindra (M & M) as one of the promoter ,by way of issuing  65.58 lac equity shares on preferential basis which is close to 40% of the total equity. This is expected to a big relief for EPC which was struggling to utilize the available opportunities due to lack of working capital.CMP is Rs.76.95

EPC INDUSTRIE - UPDATE

EPC INDUSTRIE is one of our past  recommendation @ Rs.61/-.Today it touched its lifetime high @ Rs.84.30 and closed @ Rs.82.20 Investors with medium-long term view can HOLD this micro irrigation company  for decent gain .

Old Report can be accessed HERE

EPC INDUSTRIE LTD -UPDATE

Today evening, company officially announced the launching of its website www.epcind.com

EPC INDUSTRIE Ltd - BUY

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Even if the potential  of Micro Irrigation is very vast in a

country like India, listed Companies other than

Jain Irrigation in this sector is ignored by investors  mainly

because of their inability to scale up the business.

EPC INDUSTRIE is the second largest pure listed player

in this space. This Nasik based company having an installed

capacity of 8100 Mt per annum Micro Irrigation Systems.

Company was in pathetic situation and a BIFR case  for

past many years mainly because of severe working capital.

crunch . Later in 2007, UK based PE player  Schroder

Credit Renaissance Fund  interested in EPC and invested

about Rs.18 crore to revive the company .

 The same fund again invested

in EPC and raised its stake upto the current level of  52.3 %.

In these preferential allotments ,  Schroder Credit took stake

at a price higher than the then prevailing market price of EPC ,

which indicates their confidence in this company. Meanwhile

promoters also hiked their stake through a preferential allotment.

Even there is fund infusion , turnover of the company was not

improving earlier. But now there is some  earlier signs of

improvement in this company. By effective use of working

capital , company is now started to improve capacity utilization

and margins . For the three months ended June qtr, Company

posted a turnover of Rs.23 Crore and a net profit of Rs.81 Lac

which is  higher than 50% and 300% respectively over  same

period last year. EPC is an approved supplier to the Micro

irrigation projects initiated by Gujarat and Andhra Pradesh 

State governments  which ensures a ready market for its

products. Along with this ,due to high food inflation many state

governments and Central government  taking active steps to

increase the penetration of MIS in our country .As part of this,

recently central government upgraded its micro irrigation  scheme

to a national mission with an outlay of Rs 8032.90 crore ,which

is very positive for companies like EPC. When we look through

another angle , seeing the potential here ,many world leaders are

interested to enter into the Indian MIS market .Since ,controlling

stake held by a P/E player with world wide operation ,EPC

Industries is a potential take over target for these biggies going

forward. So, those who are willing to take risk and ready to

wait, this may turn as a multibagger .CMP is Rs.61 /-