"Innoventive Industries (IIL)’s engineering expertise in metallurgy, machining and forging and constant focus to develop cost-efficient solutions has enabled it to optimize resource use and effect process and product improvements, leading to cost competitiveness. IIL’s ability to do high product customization and its own inhouse tool room facilities has given it the nimble-footedness to deliver on stringent client requirements with fast turnaround time. This is leading to marquee customer addition across IIL’s verticals at a brisk rate. Going forward, exports would drive incremental growth. We expect exports to touch ~40-50% by FY14 from the current ~24%. Weak rupee outlook for the next few quarters would help too."
"IIL acquisition strategy revolves around (1) addition of domestic companies manufacturing niche products (2) buying out specialty trading houses in Europe / US to drive better utilisation of its expanding domestic capacity and earn distributor margins. Acquisition of Sankalp Forgings in India for the OCTG portfolio and Salem Steel in the US are part of this broad strategy. IIL’s shared equity ownership and organizational structure is akin to service sector companies - a rare thing in Indian manufacturing. The promoters are first generation technocrats with varied and rich experience in the industry. In the development of IIL as a niche products company exploiting the global cost cutting paradigm and IIL’s smart acquisition strategy, Mr. Chavan has shown good business vision and acumen. We believe these characteristics are essential to sustain growth and competitiveness and for transformation of a small business to a reasonable size business."
"CEW tubes, OCTG (Oil Country Tubular Goods) and membrane strips provide highly profitable growth prospects for IIL. We expect IIL’s revenues and profits to grow at a CAGR of 15.8% and 32.8% to Rs 11.0bn and Rs 1.3bn respectively over FY11-FY14E. We value IIL on a SOTP basis. Our March 2013 fair value for IIL comes to Rs 169 per share, which implies a potential upside of 43.8%. We, thus, initiate coverage on Innoventive Industries Ltd. (IIL) with a BUY rating," says Aditya Birla Money research report.
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