IMP POWERS

IMP Powers Limited (IMP) offers an opportunity to invest in the high growth transformer sector. IMP is one of the oldest player in the power equipments segment with a product portfolio of various types of transformers, industrial meters and testing equipments. Transformers constitute about 95% of its FY2007 sales. The Company has successfully turned around after a bad phase in 2000-2005. Subsequent to the turnaround, it has achieved a CAGR of about 55% in sales over last 2 years. The EBIDTA margins have improved to a current level of 16.6% for FY 07 as against a low of 4.2% in FY 05 because of growth in sales and operational efficiency. Further the company has a very healthy order book position. The Company is undertaking an expansion project with a capital outlay of Rs 280 mn including working capital. The project includes expansion of its manufacturing facilities situated at Silvassa (U.T) from existing 3,600 MVA to 6,000 MVA. The Funds managed & advised by MOVCAPL have invested Rs 190 mn to part finance the expansion project. Brescon Corporate Advisors Ltd., were the financial advisors to the company on this deal. Further, promoters of the company & Brescon Corporate Advisors Ltd have subscribed to warrants to finance the balance of the capex program. According to industry estimates, the transformer industry has been growing at approximately 25% CAGR for last two years and is expected to maintain this momentum for next 2-3 years. This growth will be driven predominantly by domestic market requirements and partly by exports to the Middle East, Africa, Europe and the United States. As per the Government of India's plan, 78,000 MW of power generation capacity will be added in 11th Five-year plan. In addition, improvements in transmission and distribution sector coupled with the replacement demand will also add to the urgent need for transformers. MOVCAPL believes that the IMP's management has the requisite experience and capability to capitalize on the current growth opportunity in the sector. As per Raamdeo Agrawal, Chairman of MOVCAPL, ``India is rapidly moving from a USD 1 trillion economy to a USD 2 trillion economy, and the power sector will play a pivotal role in this movement. Companies like IMP which have established a strong brand and goodwill over the last 4 decades, will hugely benefit from this growth in the power sector.