Monday, December 03, 2007

NICCO Corporation: engineering / real estate play or wat?

NICCO Corporation is among the largest cable manufacturers in India. Consider the following details:

12M trailing sales - Rs.423 crore
12M trailing PBDIT - Rs.42 crore
Current Mcap - Rs.317 crore (at a CMP of Rs.35)

The company has two divisions - cables and project engineering. However, the cable division (that includes both telecom cables and power cables) accounts for close to 80% of the total sales. With both the telecom and the power sectors doing very well, demand for Nicco's wares is firmly in place. However, owing to operational and financial troubles, the company's networth almost turned negative in recent years.

Things seem to be improving according to this. The company's financial performance seems to be improving too.

Sonata Investments' (Anil Ambani-Rel. Energy group co.) stake in this company is around 14.75%. The investment arm of the ADAG group is known to have made some smart investments in the past, e.g. TV Today, SAREGAMA, and a host of other media companies. So what could have interested the ADAG group to pick up a stake in this troubled company ?? As of now, I have no idea about the same.

However, there are some other interesting developments taking place at this counter -


Prysmian signed a term sheet with Indian Nicco Corporation for a majority stake of a New JV Cable Company

Milan 31st July 2007. Prysmian Cables & Systems, a worldwide leading player in the cable industry, has signed a Term Sheet with Indian Nicco Corporation to become the majority shareholder of a new joint venture company that will encompass all Nicco Corporation's cable activities. The Board of Directors of Prysmian today approved in principle the entrance into the Term Sheet. The deal, subject to the finalization of a definitive agreement and further approval/consent of Nicco's corporate debt lenders and relevant local authorities, is expected to close during the first half of 2008. Nicco Corporation will remain as a minority shareholder of the new Joint Venture Company.

With net sales of 55.2 million Euro in Fiscal Year 2006-2007 Nicco Corporation's cable division has 2 manufacturing operations, 6 branch offices located in the country's most important urban areas and approximately 900 employees. Nicco Corporation's cable division is active in the production of a wide range of medium voltage and low voltage power cables and industrial cables for applications in several sectors (OEMs, Windmill, Infrastructure, Mining, Raylways, Defence, etc.).


Now the question is, if the cables division will be hived off, what will Nicco Corporation do? Only Project Engineering? Whether the new cables company (in JV with Prysmian) will be a listed company? The management has provided no clarity on this.

Another interesting (both positive and negative) bits on the company include:

- Land & building on free hold basis - Rs.80 crore (on cost-basis) [any development possibility here]

- 25% Holding in Nicco Parks (mcap - Rs.41 crore, Nicco Corp's stake value - Rs.10 crore). Reports have it that Nicco Parks owns 40 acres of prime land in Kolkata (something I still need to confirm), which is valued at close to Rs.2000 crore, valuing Nicco Corp's stake in the company to Rs.500 crore (vis-a-vis its current mcap of Rs.317 crore).

- Steady decline in promoter's stake in the company, down from 17.4% to 16.9% (during Mar - Sep '07).

Conclusion: Something seems to be cooking up on this counter. What, is the question?

Disclosure: I own shares of Nicco Corp, bought at Rs.24 per share. The stock is fraught with high risk (thanks to the uncertainties mentioned above) and therefore forms a very small portion of my portfolio.

1 comment:

Anonymous said...

possible merger of nicco parks with nicco corporation, post the hive off of the cable biz...???