The company is in the business of manufacture of ferro alloys. Ferro Alloys are the alloys of Chromium, Manganese, Silicon etc. Ferro Alloys are used in steel making as an additive for imparting strength and quality required in a particular grade of Steel. Ferro Alloys are classified as bulk ferro alloys or noble ferro alloys. Noble ferroy allows are used in small quantities and is produced by the Alumna Thermit process in India.
The company was incorporated on 7th April 2000 and was promoted by Mr. Suresh Kumar Patni who is also the Chairman cum Managing Director.
Rohit Ferro Tech is operating a plant which has three arc furnaces which produce 40000 TPA of High carbon ferro chrome. While the first two furnaces started production in October 2003 the third one has only started production in April 2005. The plant is located in Bishnupur West Bengal. Now the company is planning to expand by installing four furnaces in a plant at Kalinganagar Industrial Complex, Jajpur, in the state of Orissa.
Financials
The company carries a debt of 30.04 crores on its balance whereas the equity capital and reserves together form 28.57 crores. This is a reasonably high component for a company in a cyclical industry because in times of a downturn the company would find it difficult to service the interest cost on such a high component of debt.
Since Rohit Ferro started production only in 2003 and that too the sales were miniscule only the numbers for the last year and the year before carry any significance. In fiscal 2005 the turnover for the company was 105.1 crores and the net profit after tax on this was 7.75 crores. The EPS for the company for last year was Rs. 5.47 and the year before that was Rs. 4.35.
Object of the Issue
The company is coming out with this issue for financing the new project of setting up plant and installation of four Submerged Arc Furnace of 16.5 MVA each along with other allied facilities. The location for this would be Kalinganagar Industrial Complex, Jajpur, in the state of Orissa.
Key Risks
Rohit Ferro is in a cyclical industry with steel companies being the main buyers. Steel has enjoyed a good upturn in the past few years but now the industry as a whole seems to be cooling down and as such this could slow down Rohit Ferro as well.
The company is dependent on a few large customers to such an extent that the top 10 producers provide 96% of the revenues of the company.
Power constitutes 40% of the total cost of production and an increase in the cost of power might reduce the profitability of operations.
The company is relatively new with the operations beginning only in the last three years that too for fiscal ending 2003 the sales were miniscule. Now the company is embarking on a 100 crore plus expansion plan and the scale is quite larger than the one the company has been operating at till now and that too for a short period of time.
