The Hindu Business Line : Electrosteel Castings sees huge volumes

ELECTROSTEEL Castings stock on Tuesday saw huge traded volumes of over 10 lakh shares on the major bourses with around 20 per cent increase in price. According to company insiders, the unusual volumes could be attributed to buying by outsiders and not the promoters or persons acting in concert.

According to dealers, the unconfirmed news of proposed raising of capital through preferential placement of shares at a premium to the market price was flying around in the market for the last few days. A Mumbai-based investment firm is understood to have led the buying spree in the counter.

Mr S.Y. Rajagopalan, Director-Finance of the company, told Business Line here that though there are proposals to raise capital for projects, which might be taken up in future, but nothing has yet been firmed up. "In another three months, options for project and finance are expected to be finalised," he added.

Analysts and brokers said that the stock had been ruling firm around Rs 400-level without any frenzied activity and was generally considered a long-term bet because of growth potential in terms sales volume. A fund manager, however, observed that the though pipe makers have been seeing growth in sales volume in the past months, margins were under pressure as the input costs were rising at an exponential rate. Electrosteel, a pioneer in ductile iron pipes, has witnessed margin pressure owing to escalation in cost of inputs, industry insiders admitted.

The Government's thrust on water, infrastructure and housing through "Bharat Nirman" project augurs well for the pipemaker. "Exports provide better margins and provide partial cushion against rising raw material prices," Mr Gaurav Dua of Anagram Stockbroking observed. Exports contribute around 20 per cent of the Electrosteel's turnover.

According to analysts, the delay in getting a "near final" order released for New Veeranam extension water supply project in Tamil Nadu is a negative for Electrosteel's topline growth. The company's coke oven plant at Haldia, commissioned recently, has suffered delay. Electrosteel is also setting up sponge iron plant at Haldia.

"In view of unfolding opportunities and the need for fresh investment, the company is likely to raise fund through cheaper equity route," an industry observer said.

At today's closing price of Rs 466.80, the stock traded at 7.8 times its three-quarter annualised EPS of 59 per share.

As on December 31, 2004, promoters currently held 63 per cent stake, while public holding was placed at 22 per cent. No FII holding was reported.

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