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C. Raja Rajeshwari

INVESTORS with a long-term perspective can consider exposures in Grauer & Weil (India) - GWL.

Catering to almost all the companies in the automobile industry, GWL is among the larger manufacturers of electroplating chemicals and equipment.

Taking into account the sustained growth in the auto industry and GWL's pre-eminent position, investors can consider exposures in GWL.

The stock trades at Rs 44, which is at a price-earnings multiple of nine times its trailing twelve-month earnings.

Investors can consider small exposures due to the low liquidity in the stock. GWL is traded only on the BSE.

Business: GWL derives about 85 per cent of its revenues from the chemical division. It supplies finishing chemicals and technology to companies such as Hero Honda, TVS, Bajaj Auto, Escorts, Sundram Fasteners, Atlas, Hero Cycles, Siemens, L&T Defence and Railways. The company has about 45 per cent market share.

GWL's engineering division caters to the auto industry and also to companies engaged in metal finishing. It derives about 15 per cent of the revenues from this division.

Export market: Having captured most of the market share in the domestic market, GWL is focussing on exports, which would be its growth driver.

GWL has a range of collaborators — Serfilco of US, NDS of Japan, Hawkings Corporation of UK and Utikal of Germany — from whom it sources technology. The company also has a joint venture with Goema of Germany for developing recovery systems and effluent treatment systems. This has helped GWL to expand its product range.

Margins steady: For the half-year ended September, GWL posted a topline growth of 4 per cent. Due to sharp increase in the raw material costs, profits fell from Rs 2.7 crore to Rs 1.8 crore on a year-on-year basis. Going forward, the performance should improve, as off take picks up substantially in the fourth quarter.

For the past five years, its operating margins have been maintained in the eight-nine per cent range. This fiscal, GWL has effected price increases, passing on a portion of the rise in raw materials costs to its customers.

Value additions: GWL has been attempting to move to the upper end of the value chain, where margins are better.

It has introduced a number of specialty metal-coating chemicals such as Koalex, Superspec and Ginplate over the year. GWL has also made a successful foray into niche markets of top coatings and final finishes.

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