Balmer Lawrie & Company

Balmer Lawrie & Company (BLC) has emerged a multi-activity, multi-technology, multi-location conglomerate, with global foot prints. Along with its joint ventures (JVs), the PSU encompasses diverse interests including industrial packaging, logistic infrastructure services, tours and travel and grease and lubricants.

The manufacturing operations are in Kolkata, Mumbai, Chennai, Mathura and Silvassa and offices are at many locations in India. There are several JV operations in India and abroad, with overseas offices in the UK and UAE.

The seven strategic business units (SBUs) have presence in both manufacturing and service sectors. Major manufacturing SBUs comprise industrial packaging (IP) and greases and lubricants (GL), while key service SBUs include tour and travel (TT) and logistics infrastructure and services (LIS). Besides manufacturing performance chemicals and undertaking service-based activities such as project engineering and consultancy for the oil and infrastructure sector, activities include transporting containers and blending and packaging tea. This SBU approach provides the required focus and independence for each business unit.

With 200-litre capacity, the IP division is the largest manufacturer of steel drums in India. The major customers are lubricants and greases, transformer oil, chemicals, agrochemicals and food and fruit industries. Steel drums are utilized for safe packing, transport and storage. These drums are sold through a pan-India marketing network. The major opportunities for the SBU lie in extension of product range, leveraging the benefit of the multi-locational presence and well accepted quality standards across diverse industry segments leading to the most-preferred-supplier status with a large base of customers. Moving up the value chain as a packaging, filling and logistics services are offered to a large number of customers.

The LIS SBU comprises three segments: container freight stations (CFS) typically set up in the vicinity of ports, inland container depots (ICDs) established within proximity of industrial belts and located in the hinterland and warehousing and distribution. The CFS and ICD facilities are set up mainly as extension of port for custom clearance to decongest ports and to handle and temporarily store export-import cargo-laden or empty containers. These provide an integrated platform for pursuing activities such as loading, unloading, transporting, stuffing and de-stuffing of containers.

The existing low level of containerized export-import traffic in India compared with the world average offers scope for incremental business in the years to come. The economy is also showing signs of turning around and the push in infrastructure growth should provide opportunity to the SBU for further grow. The emergence of new storage models such as multi modal logistics park will improve quality of warehousing and optimize storage space.

The TT SBU is one of the largest International Air Travel Agencies Association-affiliated travel agencies in the country operating in the organized sector. The business consists of three segments: domestic travel, international travel and tour packages. Major clients of this SBU are government departments and ministries and PSUs. With the feel-good factor driving the economy post elections, a positive impact on the SBU is anticipated.

The GL SBU caters to two segments: automotive and industrial and Marine. The products are marketed under the Balmerol brand, a renowned name in this sector. A major strength area of the SBU is the knowledge base and technology at disposal. There is presence in the industrial sector, particularly in steel, mining, defense and railways, which is bolstered by the strategic location of the three manufacturing facilities in the east, south and west. The recent crash in base oil market will push down lubricant prices and improve the demand and the margin. Base oil is the primary raw material for manufacturing greases and lubricants.

Sales grew 12% to Rs 712.18 crore and profit after tax (PAT) jumped 66% to Rs 36.24 crore in the quarter ended December 2014 over a year ago. Sales grew 8% to Rs 2126.42 crore and PAT was down 8% to Rs 78.53 crore in the half year ended December 2014.

We expect BLC to register sales of Rs 2850.19 crore and PAT of Rs 144.19 crore in the fiscal ending March 2015 (FY 2015). Projected EPS works out to Rs 50.6. This EPS is likely to rise to Rs 61.6 in FY 2016. The share price was trading around Rs 586 on 23 February 2015.

Once the Indian economy gathers steam, all the divisions will do well. Moreover, the logistics, travel and lubricant businesses command high valuations in the market.

source: capital market