The Hindu Business Line : VBC Ferro powers ahead on growth prospects

According to analysts and brokers, strong growth possibility due to rising demand in ferro alloy products at home and in the international markets is making the counter tick.

Mr Arun Kejriwal of Angel Broking said capacity addition, coupled with change in product mix, is likely to bring about strong volume growth and improvement in margins for the company in the future. "We expect the company to post a CAGR of 36.6 per cent in income from operations by end of next fiscal against the 2003-04 figure," he added.

Moreover, VBC's investment in power generation through a subsidiary is considered positive for the long-term. "This would help in ensuring reliable power supply at reasonable cost for its ferro alloys plant and at the same time offer the company an opportunity to leverage on the potential thrown open by the power reforms," Mr Kejriwal added.

VBC group is setting up a 460-MW power plant in Andhra Pradesh, which is its first foray into the power sector. The power plant would meet its own demand of 15 MW and sell the balance to the State power utility. The first phase of 250 MW would become operational shortly and become fully operational by December 2006.

Further value unlocking is expected through the power subsidiary going public during the next fiscal, Mr Kejriwal added. The group has already invested around Rs 100 crore in the project. The company is also setting up a 96-MW power plant in Orissa.

Incidentally, during 2003-04, apart from a robust operational performance in sales, VBC's net profit had jumped from Rs 15 crore to Rs 34 crore, on account of the Rs 23 crore profit from sale of investments in Andhra Pradesh Gas Power Corporation Ltd.

According to Mr Rajesh Agarwal of CD Equisearch, the rising raw material costs, however, is a cause for concern for VBC. "The net profit margin has dropped to 7.17 per cent as on December 31, 2004 from 17.34 per cent as on December 31, 2003 despite jump in sales by about 42 per cent", he observed.

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