Pricol gears up to regain lost market share: Nirmal Bang

Premier Instruments & Controls (Pricol) Ltd is engaged in the business of manufacturing Dashboard Instruments and Accessories, Oil Pumps and Idle Speed Control Valve Assembly. The company promoted by late N Damodaran and LG Varadarajulu in 1972 commenced commercial production in 1975.

Primarily an automobile ancillary unit, the company diversified into electronic control instruments, precision machine tools, panel and sensor instruments for defence and industrial gauges. The name of the company has been changed from Premier Instruments & Controls Ltd to PRICOL Ltd.

Pricol Ltd, the industry leader, had lost a significant portion of its market share due to labour problems in the year 2009. The company has resolved all these issues and is all geared up to regain the lost market share.

Pricol has taken a number of initiatives, including entering into a JV with Johnson Control Boards (JCB) and allotment of warrants to PHI Holdings, among others. These initiatives are expected to help the company excel, going forward considering the fact that Indian auto-ancillary players associated with global names would be at an advantageous position. Denso Corporation, Japan has a 12% stake in the company (promoter holding: 35%).

With these initiatives, the company should not only be able to procure electronic components at a lower cost, thereby improving operating margins, but also be able to tap new clients leading to higher revenues.

Pricol has taken a number of initiatives to control costs. The benefits of these measures should be reflected over the next few quarters. These initiatives not only include value-engineering exercise leading to reduction in raw material expenses, but also effectively managing labour and other administrative expenses. The company has made efforts to reduce material cost by 500 bps over the next one year from the present 67% of the net sales figure.

The company has a clean balance sheet. Pricol hived off a portion of its operations at Pune in favour of the joint venture with Johnson Control Board last year. This led to a one-time gain of more than Rs 40 crore.

Pricol had distributed a dividend of Rs 0.60 (60%) for FY11. The company paid a dividend of Rs 0.80 during FY12 of which 0.40 was a one-time special dividend on account of capital gains booked from the slump sale.

Since the promoters are engaged in a number of other businesses in addition to Pricol, the company has roped in KU Subbaiah, ex-CEO, Tyco Electronics to spearhead the operations of the company.

Financials

Pricol clocked net sales of Rs 1,050.2 crore in FY12, registering an increase of 21.7% y-o-y. PAT stood at Rs 62.9 crore compared to Rs 17.04 crore during the same period last year. The profits for FY12 included capital gains of Rs 41.6 crore. During Q1FY13, the company clocked net sales of Rs 218.9 crore compared to Rs 213.8 crore during FY11. On a like-to-like basis, net sales grew by 18% y-o-y considering the fact that figures for last year included net sales of operations sold off to the JV with Johnson Controls. The PAT for the quarter stood at Rs 3.36 crore compared to Rs 4.23 crore.

Source: Nirmal Bang's Beyond Market

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