Sicagen India Ltd--Poised for instant growth...

BSE Code: 533014

Face Value: Rs.10

CMP- Rs.9.78 (Unbelievable but true)

Book value: Rs.89.54

52--week High/Low: Rs.200/Rs.2.81

Market Cap: Rs.34.74 Cr

Sicagen is India's leading providerof trading and marketing services for construction-related industrial and retail infrastructure. Sicagen's core business is trading of building materials such as steel tubes, MS/GI pipes, boiler tubes, seamless tubes, rectangular/square hollow sections, TMT steel rebars, PVC pipes, electrical cables, steel fittings and cement. Sicagen is the authorized distributor for Tata Steel, Jindal Pipes, SAIL, Finolex Cables, Supreme Industries, Maharashtra Seamless and ACC Cements.

Sicagen is also the leading dealer of commercial vehicles for Tata Motors in Tamil Nadu state. It operates showrooms and and workshops at Chennai and Trichy covering 11 districts in Tamil Nadu.

It's customers include corporates, retail vendors, high income individuals.The above two mentioned businesses are the core businesses and contribute more than 90% to the company's revenue.

They're the sole agents in India for Woodward USA Governers, the no.1 worldwide in this area. It has huge applications in power, heavy industries,engineering.

The company has exited the Speciality Chemicals business. It also sold of 10 wind mills in Oct'08 as the operating and maintenance cost was high, on account of wind mills being decade old.

The business was with Sical Logistics Ltd but became a separate entity in 2006 and then got listed post demerger in 2008. It got listed in BSE around Rs.200 and NSE at Rs.149.70.

Let's come to the more interesting facts about the company :

1. The company can be a true value play with its current MCAP at Rs.34.74 Cr. The company has about Rs.10 Cr in cash and about Rs.280 Cr as Net current assets.

2. Even if one values the inventory at 50% of the value mentioned in the books, then Net current assets stand at Rs.255 Cr.

3. The book value of the shares of the company is Rs.89.54, which makes it a value play at the current price tag. The price to book is only 0.1 which makes it one of the cheapest stocks in this space.

4. The company is expected to do well going forward due to overall improving environment.

5. In the coming years, the company plans to introduce large retail formats with a more comprehensive range of building materials products. The Indian retail market for construction materials holds great potential and it is expected that such new venture will be able to delight customers with best-in-class products and service.

6. If we go through the revenue mix we would find that bulk of the revenues come from the businesses of Building materials (56%) and Vehical Sales (41%).

7. According to the Scheme of Arrangement [Demerger] between the Company and Sical Logistics Ltd (Sical) effective 01 October 2006 as approved by the shareholders at the Court convened meeting held on 21 September 2007, has been sanctioned by the Hon’ble High Court of Judicature, Madras vide its Order dated 20 December 2007. The demerger process was completed by filing the above said Order with Registrar of Companies, Chennai on 14 January 2008. Pursuant to the aforesaid Scheme, the shareholders of Sical were allotted with equity share [s] of the face value of Rs.10 each as fully paid-up from the share capital of the Company, in the ratio of 1:1 (one equity share for every one equity share held in Sical) as on the Record Date ie. 01 March 2008.

ACCORDING TO SOME SOURCES, this is one of the prime reasons for the tanking of the shares on the day of listing from Rs.200 (listing price at BSE). The free shares were dumped, by the shareholders as the company's business was not understood by many. Moreover the things happened during middle of last year (2008) when the stock markets were tumbling, with most of the stock hitting lows.

But now with the improvement in the overall business environment, the trading business is expected to generate steam. The company's fundamentals are expected to improve from this quarter onwards.

The Building materials division continues to hold a coveted position as one of the largest distributors for TATA Pipes in South India. It is also a distributor for prestigious manufacturers like Jindal Pipes Ltd, Steel Authority of India. Finolex Cables Ltd, Supreme Industries Ltd, Maharashtra Seamless Ltd and ACC Cements. The sales volume in steel pipes FY09, was as high as 35,000 Tons per year which enabled the division to have a lion’s share in the southern region.

The strategy for trading of building material has been to address opportunities in high volume business and to address the needs of large infrastructure industries in India.

The Company expects a robust growth to continue in FY10 for which the marketing team has been suitably trained & motivated. The Company is also planning to expand further beyond the existing range by catering to a wide customer base and increasing our product portfolios.

FY08, was a turnaround year for TATA Commercial Vehicles division. During the year, the boom in commercial vehicles market resulted in a sale of huge number of TATA trucks. The Company Contributes 15% of the total sales for TATA Motors in Tamilnadu and is growing at a faster pace and is increasing its market share and presence in the given segments. The Company is presently trading TATA commercial vehicles starting from TATA ACE [0.75 Tonne] to the highest range of TATA NOVUS [40 Tonnes].

8. Positive highlights:

Wind Mill: Due to high maintenance cost on running the Wind Mills located at Palladam Taluk, Coimbatore Dist, the Company was unable to maintain profit margin and this has impacted this division’s performance in FY08. It is also foreseen that the maintenance cost will also be very high in the coming years as the Wind Mills are, more than a decade old. Hence the decision for discontinuing this operation has been taken. This is postive for the company as it can focus on its core competence.

Plantations: The company disposed off coffee estates located at Shakleshpur, Karnataka State and this will again help the company focus on its core business.

The company is expected to declare results very soon and according to my close sources, the results will be more or less along the expected lines. From this quarter onwards the true colour of Sical Group, will start to show. Besides this the company is entering a new business segments.

There are also rumours of comany getting some new orders, which could be declared at the 3rd/4th week of this month. Hence at this price tag of Rs.8.78 and with the branding of Sical Logistics Ltd (BSE Code: 520086) the stock is expected to move ahead very fast in the days to come. A target of Rs.50 plus in the next 6 (six) months is what I am expecting--this could be another Sanguine Media Services Ltd.

By the way today Sanguine Media Services Ltd hit the circuits after SMS was sent to the Paid Groups mentioning that some "Good News are on the offing" and hence one should accumulate the same. The stock hit the upper circuits in the next 20 minutes from lower freeze.