Nitin Fire Protection Industries has entered the capital market on 15th May 2007 with a public issue of 33.90 lakh equity shares of Rs.10 each in the price band of Rs.171 to Rs.190 per share.
The proposed issue is to finance Rs.118 crore project being set up by Nitin Cylinders Ltd., a 100% subsidiary of the company, to manufacture 5,00,000 high pressure seamless cylinders per annum at Visakhapatnam Special Economic Zone. The project is being set up in two phases of 2,50,000 cylinders per annum each, which will go on stream in May '07. The cost of 1st Phase is Rs.61.27 crores while that of 2nd Phase is Rs.56.81 crores. The project is being financed with the term loan of Rs.37 crores, rights issue (having already made) of Rs.6.25 crores, pre-IPO placement of Rs.7.43 crores, internal accruals of Rs.11 crores, and public issue (at the upper band) of Rs.64.41 crores.
Everest Kanto Cylinder Ltd went public on 22-11-2005 with an issue of 56.25 lakh equity shares at Rs.160 per share aggregating Rs.90 crores to finance its project to manufacture 3.40 lakh high-pressure seamless gas cylinders at Gandhidham at a project cost of Rs.106 crores. This was partly financed by debt of Rs.15 cores.
So when we compare it with the project cost of the company, the cost project of Nitin is cheaper with better financing mix. The promoters have got the experience of marketing high-pressure seamless gas cylinders by its wholly owned subsidiary Eurotech Cylinders P. Ltd. This subsidiary had sales of Rs.51.35 crores and net profit of Rs.5.04 crores for FY 07. The company is getting these cylinders contract manufactured from BTIC of China which are used for industrial gases, medical gases, fire fighting equipment, beverage industry, CNG - NGV vehicles, etc.
However, the ownership structure of the company is bit complicated. The company of its own is engaged in providing fire protection solutions, turnkey solutions for safety and security systems and manufacture of CNG cascades. Apart from this, the company has 4 wholly owned subsidiaries and 95% share in a partnership firms, and all are engaged in the similar line of activities like supply of fire detection products, high pressure seamless cylinders, turnkey project of safety and security systems and setting up a new plant for manufacture of high pressure seamless cylinders for which this issue is being made. Also, the best part that while transferring the control of these subsidiaries from the promoters the same were made either at book value or below that. The post issue equity of the company will be Rs.12.60 crores of which about 70% shall be held by the promoters.
For FY '07, on consolidated basis, the company posted a topline of Rs.102 crores and bottomline of Rs.9.99 crores on equity of Rs.8.87 crores. Hence the existing performance and the new project instills confidence and investment is strongly recommended in the issue for short, medium and long-term gain.