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Engineers India Limited

Issue Details

Continuing on its guided divestment program worth INR400bn for FY11, the GOI plans to dilute 10% stake in Engineers India Limited (EIL) by way of a FPO consisting of 33.7mn equity shares. The offering, priced at INR270 – 290 is expected to bring in INR9-9.8bn to GoI's kitty. Post the issue, GoI's holding in EIL would dilute to 80.4%.

Investment Rationale

Key player in the hydrocarbon industry with renowned relationship clientele

Over the past four decades EIL has been commercially successful in applying indigenous technology and expertise for undertaking projects across offshore platforms, oil & gas processing, oil refining, petrochemicals and pipeline projects.

Strong revenue visibility over next 30-36 months

EIL's present order backlog stands at INR62.4bn (2.4x FY11E revenues), segmented in a 53:47 ratio among the LSTK & C&E projects. In terms of sectors, the order book is well diversified across refining (55%), petrochemicals (25%), metallurgical & infrastructure (3%), pipeline (7%) and overseas (~10%) projects.

C&E services to drive superior margins & return ratios

Over the years execution of high margin C&E projects (EBIDTA 35-40%), which consists of engineering consultancy, project management and implementation services have lend a competitive edge to EIL vis-à-vis industry peers and have been instrumental in delivering phenomenal return ratios (>30%) to the stakeholders.

Diversification across newer geographies & growth sectors on cards

After making successful inroads in the global hydrocarbon market, EIL aims at consolidating & expanding its presence across terrains where it has previously implemented projects namely Middle East, North Africa and South East Asia.

Source : Equity Bulls

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