Capital Structure  

Equity shares outstanding prior to issue: 21,900,000 shares of Rs 10 each  
Equity shares outstanding after the issue:  42,993,900 shares of Rs 10 each                                             

Background

Burnpur Cement was incorporated in June 1986 as Ashoka Concrete & Allied Industries Pvt Ltd. The company commenced operations in October 1991 with a 30 tonne per day (tpd) plant in Asansol, West Bengal , to produce portland slag cement (PSC). The company’s name was changed to Burnpur Cement Private Ltd on Sept 18, 2001 . The company was subsequently converted into a public limited company, and the name was changed to Burnpur Cement Ltd on Nov 12, 2001 . At present, the company’s plant produces 1,000 tpd of cement, and it is a major producer in the eastern region. The company has a presence in West Bengal , Jharkhand and Bihar . It intends to expand its network to Orissa, Madhya Pradesh, Uttaranchal, Haryana and Delhi .  

Objective of the issue  

The objective of the issue is to set-up an integrated clinkerisation and cement grinding plant with a capacity of 800 tpd, expandable to 1,600 tpd, in Hazaribagh district of Jharkhand at Patratu Industrial Estate, for manufacturing clinker, ordinary portland cement (OPC), Portland Pozzolona Cement (PPC) and Portland Slag Cement (PSC).

Key Investment Rationale

Demand-supply mismatch in eastern India

There is a significant gap between demand and supply in the eastern region. The proposed expansion would enable the company increase capacity. With several developmental projects on the region, especially on infrastructure, demand for cement is expected to remain robust. Demand will be boosted by the creation of special economic zones (SEZs).

Capacity expansion to consolidate company’s position

To boost its presence in the eastern region, the company has increased the capacity at its existing plant over from 30 tpd to 1,000 tpd. The cement production facility to be set up at Patratu in Jharkhand would be scaled up taking the total production capacity to 1,800 tpd.

Government incentives to boost margins

The company’s proposed project at Patratu would be eligible to avail the various incentives from the state government. They are:

• Capital investment subsidy of Rs 7 crore to be paid within three months from the commencement of commercial production.
• 75% of the VAT paid to be refunded in the subsequent year for a period of 8 years.
• 50% of interest paid or 2% of the turnover (whichever is minimum) for a period of 5 years subject to maximum of Rs 1 crore per annum

Key Concerns

• The company’s business is dependent upon its ability to source sufficient limestone for its operations.
• The company is dependent upon the continued supply of coal, gypsum and other raw materials and fuel, the supply and costs of which can be subject to significant variation.
• The business and future results may be adversely affected if the company is unable to set up the proposed plant at Patratu.

Financials  

The company’s turnover grew 82.94% from Rs 14.13 crore in FY05 to Rs 25.85 crore in Fy06. Profit after tax increased from Rs 0.43 crore to Rs 0.88 crore.

Valuations