The Hindu Business Line : N.R. Agarwal up on growth hopes

N.R. Agarwal Industries (NRAI) seems to have caught the fancy of some market players for its growth prospects after capacity expansion and installation of captive power plants.

The stock today finished at Rs 35.50, up 4.57 per cent with a traded quantity of 1.87 lakh shares on the BSE.

According to a fund manager, the company has completed the expansion and opertionalised the captive power plants at its unit at Vapi in Gujarat . "The positive effect of the expansion and savings on account of power cost is expected from the Q2 of this fiscal," he commented.

The plant was shut for 45 days in April and May this year, according to the management, to complete the expansion plan, which saw duplex board capacity rise to 45,000 tpa from 32,400 tpa. The newsprint capacity of the plant is 30,000 tpa. The company has installed two captive power plants for the duplex board and newsprint units.

According to Mr Rajesh Agarwal, chief analyst at CD Equisearch, the company's capacity utilisation, sales and profitability are expected to rise substantially in view of steady growth in demand for its paperboard products from user industries, particularly FMCG and drugs.

"Some of the top companies, such as Glaxo and Colgate are its clients. As it is, the paper and paper board industry is on an upswing and compared to its peers the stock's market price appears relatively cheaper," Mr Agarwal said.

The current capacity utilisation for the duplex board has reached at around 90 per cent at the NRAI plant, indicating surge in demand, sources in the paper industry circles observed.

In September 2004, the promoters raised their stake to 57.06 per cent from 28.44 per cent through a preferential allotment (under a SEBI exemption from making a public offer) meant to part finance one of its captive power plants. As of June 30, the promoters held 57.11 per cent of the enhanced equity capital of Rs 10.25 crore.

The company had reported sales of Rs 112.67 crore in 2004-05. It posted a PBDT of Rs 8 crore (Rs 4.76 crore) and a PAT of Rs 2.92 crore (Rs 1.59 crore) in 2004-05.

An analyst with an institutional brokerage firm said that NRAI's depreciation and interest costs, however, would increase following the expansion project.

"But the paper board price rise and sales increase should amply compensate and create additional surplus for the company in the quarters ahead," he added.

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