Swelect Energy Systems Ltd. - ZENMoney

Company Profile: Swelect Energy Systems (SWE) (formerly Numeric Power Systems) sold it's UPS business to Novateur India (a subsidiary of Legrand SA) on a slump sale basis for Rs. 837.08 crores. Post the sale SWE has turned to Solar Power as it's main business area. SWE presently manufactures solar power controllers (through its plant in Salem, Tamil Nadu), Solar Photovoltaic Cells (through it's 49% stake in HHV Solar Technologies Pvt. Ltd. located in Bangalore with a capacity of 40 MW) and other auxiliary items. This apart, the company is also a EPC player in terms of executing and commissioning of solar power projects like Solar Roof-top installations and Solar Power Plants. Also, the company has solar power generation capacity of 2 MW and a 1.5 MW capacity Wind Mill. Apart from these areas the company is also entering into LED Lighting space as an auxiliary business interest. SWE has three other subsidiaries and associates in this business space namely, Swelect Energy Systems Pte.Ltd. (Singapore, 100% stake); Swelect Solar Energy Private Limited (100%) and BS Powertech Solutions Pvt. Ltd. (76%). SWE has also ventured into Steel & Alloy foundry castings business through it's wholly owned subsidiaries, Amex Alloys Pvt. Ltd (AAPL) (100% stake) and Amex Irons Private Limited (AIPL) (100% stake).

Strengths:

- Company has a very strong balance sheet with Cash & Bank balance and Current Investments of Rs. 526.74 Cr. (March 31st, 2013) or Rs. 521.52 per share (including cash in escrow account).

- Company's subsidiary Amex Alloys Pvt. Ltd., AAPL, is an operationally profitable business and is expected to grow at a significant pace.

- Company has a proven execution capability in solar off-grid installation and smart grid space.

Concerns:

- Company is not operationally profitable at present in it's Solar Energy/Systems business at this juncture.

- Solar power business is susceptible to regulatory changes in terms of prices and tariffs thus possibly affecting the realizations.

- There is a possibility of the company getting into un-related diversification.

Outlook: SWE plans to set up at least 10 MW of Solar Power capacity every year for the next five years. It wants to diversify it's user base by customizing the capacity additions based on the pre-set capacity needs of prospective clients (in different sectors). This will help them to reduce the dependence on SEB's. This apart, it's present biggest business contributory namely, Foundry Business is expected to maintain it's traction in the coming quarters. Acquisition of HHV Solar adds to the capabilities of solar charge controllers & inverters and places the company as a complete solution provider which, along with it's spread across other parts of the value chain (EPC to IPP) holds the company in a relatively better position. This along with a strong balance sheet and proven execution capabilities of the management provides requisite comfort levels for investment.

Source : Equity Bulls

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