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There is something promising about this little-known defence-related firm

by The Editor
December 10, 2018
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There is something promising about this little-known defence-related firm
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By Soumya Malani and Arun Mukherjee
There is lot of interest in defence-related companies and we analyse one of the unknown smallcap defence companies which seems to possess quite a bit of potential.

SIKA Interplant is a publicly listed ISO9001 engineering company in projects, systems, products and engineering services for aerospace, space, marine, automotive and core industries. SIKA has offices in Bangalore CBD and manufacturing facilities on Hosur Road, Bangalore and has offices at Mumbai, Kochi and representatives in other major Cities.

The companys largest customer is the government. The business is project-related, hence its always lumpy. Last three years has been a very lean period for the company. There is a large component of imports in its business, hence the gross margins are low. They are being guided closely by Dr Nair for business forays and growth.

The company plans to remain debt free and grow on internal accruals. It wants measured growth rather than fast unprofitable growth. There seems to be a lot of openness in the current government to support the industry, but things could move faster. The company plans to take revenues to Rs 100 crore in the next 4-5 years. It is happy to have margins at current levels and continue this growth – but margins should expand.

The Aerotek JV is a big deal. This is for an MRO activity for which all Indian aircraft flying to Europe, hence there is no competition. The benefits to aircraft owners will be lower costs and down time. Currently the downtime is approximately a year, which could easily reduce by half. The same capability could be used for Aeroteks requirements in East Asia, its current European capacities are full. The market opportunity could be approximately $20 million in the first phase with high margins. It has spent approximately Rs 3-4 crore to set up the facility for this biz, which is complete. It would expand this facility phase wise. Also, this biz will be more annuity based rather than lumpy. The promoters son is an ex-Goldman and understands shareholder value appreciation. They have large ownership and, hence, their fortunes are also linked to the performance of the company and its stock. Only time will tell if the company is able to perform at its full potential and create wealth for stakeholders.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

Original Article

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