Foseco India

Foseco India is completely debt free company , part of Vesuvius plc a British engineered ceramics company headquartered in London with a rich history of more than 300 years. Foseco India is engaged in the manufacture of products used in the metallurgical industry. Foseco India Limited is acknowledged as the only company in the country that possesses the capability of offering the widest range of solutions for producing casting of the highest standards. It is a leading supplier of metallurgical chemicals for the ferrous and non-ferrous foundry Industry. 

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FOSECO as the name stands originates from the term FOundry SErvices COmpany. Foseco India, a JV company between Greaves of India and Foseco of UK was incorporated in March 22, 1958 as Greaves Foseco. 

The technical collaborator Foseco UK held 66.5%(as on March 31, 2003) stake in the company. The company’s products are sold both directly and indirectly to industries like Passenger Cars and SUVs, Commercial Vehicles, Agricultural Machinery, Construction and general purpose steel, Textile machinery, two & Three wheelers. It’s products also found usage in Steel, Petrochemical and food industry valves and pumps.

It manufactures 400 different products for the metallurgical industry. The products are in the nature of additives and consumables and improve the physical properties and surface qualities of castings as well as reduce costs of melting, moulding and castings.

The company’s market covers integrated steel plants like SAIL and TISCO, mini mills like Mukand, Kalyani and Musco; and foundries like Ennore Foundries, Lakshmi Machine Works, etc. The company exports its products mainly to Middle East, Far East, Sri Lanka, Nepal, Kenya, Ghana, Bangladesh, Singapore & Taiwan.

Foseco Timeline

• 1958 JV between Greaves and Foseco Plc, UK  and was incorporated as Greaves Foundry Services Private Limited.
• 1962  rechristened as Greaves Foseco Limited
• 1994  became Foseco India Limited as Greaves exited the business
• 1994  listed at the Bombay Stock Exchange
• 2000 Burmah Castrol plc was acquired by BP Amoco Plc and in accordance with SEBI Takecover code BP Amoco plc via Burmah Castrol plc a subsidiary company,made a open offer to the public and has acquired 1277292 shares of Foseco India Ltd.
• 2002 In the year 2002, the Company has increased its installed capacity of Metallurgical Chemicals by 570 Tonnes(Tonnes per annum based on 2 Shifts). With this Capacity Expansion, the total installed capacity of Metallurgical Chemicals has increased upto 24830 Tonnes.
• 2003  listed at the National Stock Exchange
• 2008  Acquisition of Foseco plc by Cookson Group plc
• 2009  Integrated Management System: ISO 9001, ISO 14001 & OHSAS 18001.
• 2012 Foseco India Limited became part of the Vesuvius plc following demerger of Cookson Group into Vesuvius plc & Alent plc.  

History

Foseco

In Birmingham, UK in 1932, Eric Weiss and Dr Kossy Strauss set up Foundry Services Ltd – the company that would become Foseco. Dr Strauss was a chemist, and with Eric Weiss on the commercial side, their mission was to provide products and services that truly supported the foundry industry. They began with six flux products that they improved iteratively as they learned more about their customers. In the 1940s, Foseco developed Feedex powder and Ferrux anti-piping covers, with more innovations and expansion overseas following.

Parent Company Vesuvius

The company was founded by Isaac Cookson in 1704 as a collection of metal and glass businesses on Tyneside.In 1851 the Company diversified into lead manufacturing. In 1924 it merged with Lock Lancaster and W.W. & R. Johnson & Sons to form Associated Lead Manufacturers. It was first listed on the London Stock Exchange in 1930.[4] In 1966 it was renamed Lead Industries Group and in 1979 it acquired the A.J. Oster Company, a non-ferrous metal producer.[5] In 1982 it changed its name again to Cookson Group (reflecting the name of the company’s founder) and in 1987 it bought the Vesuvius Crucible Company, a ceramics supplier. In December 2012 Cookson Group changed its name to Vesuvius, the former performance materials division was demerged to form a new company called Alent and the name Cookson ceased to be used

Foseco has been associated with the metals industry for over 75 years and is today acknowledged as a world leader in the supply of consumable products for use in the foundry industry with a presence in 32 countries and major facilities in Germany, USA, UK, Brazil, China, India, South Korea and Japan. 

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Business

What are foundry consumables?

The comprehensive range of foundry consumables and equipment for iron, steel and non ferrous foundries includes insulating and exothermic feeding systems, filters for liquid iron, steel and aluminium, direct pour technology, solidification simulation software, non ferrous metal treatment and degassing systems, metal stream inoculation, advanced coatings, environmentally friendly binders, lining systems for ladles and furnaces as well as energy saving crucibles.

What does a foundry do?

In simplified terms, a foundry is a factory where castings are produced by melting metal, pouring liquid metal into a mold, then allowing it to solidify.

Foundries form the heart of any manufacturing based economy. Foundries typically produce castings that go into different user segments. These segments can be broadly classified into automotive, construction, heavy machinery, general engineering and mining. The processes in each foundry have unique characteristics, so customers need to be provided specific customised solutions.

Foundries have a huge role to play in the industrial development of India. A foundry by melting the metal, pouring the liquid in a mould, allowing it to cool and solidify into desired shape. Foundries produce metal products for railroads, engine, tractor, mining, earth moving machinery, pipe components and machines used to make essential everyday consumer products .

Customer Segments

• Automotive
• Railway & Heavy Transport
• Construction and Mining
• General Engineering
• Petro-Chemicals & Power

The Company partners with its customers to deliver measurable improvements to the performance of its customer’s production processes. Foseco is committed to the belief that only by creating maximum value for the customer, can a fair share of that value be retained by Foseco as profits.

Financials

Foseco India Follows Dec-Dec year for preparing financial statements such as Annual Report.

For the Quarter Ended Sept-2020

The company had been hit hard due to nationwide Lockdown.

• Net Sales at Rs 68.95 crore in September 2020 down 12.42%
• Quarterly Net Profit at Rs. 5.08 crore in September 2020 down 50.27%
• EBITDA stands at Rs. 8.49 crore in September 2020 down 36.17%
• Foseco India EPS has decreased to Rs. 7.95 in September 2020

Key Financials

• Company has Operating margins consistently in range of about 15%.
• Company is a consistent Dividend Payer.
• Company has solid ROCE of above 30%.
• Promoter Holding is almost 75%.
• Company has cash and equivalents of 112crs.
• Company is completely Debt free.

Foundry Sector Highlights

India continues to be the second largest casting producer in the world, be manufactures metal cast components for applications in Auto, Tractor, Railwa• Defence, Aerospace, Earth Moving, Textile, Cement, Electrical, Power machinery pumps etc. Despite an unprecedented slowdown in 2020, the prospects for the Indian foundry industry looks positive. India has the demographic advantage and as the economy picks up the demand for castings will increase.

Conclusion – : 

Foseco India with a strong presence in India and business spread across the globe with a presence in 32 countries , a strong parent with rich history of more than 300 years, consistent dividend paying , completely debt free , high return on capital (Above 30% ) and coupled with huge cash and equivalents with consistent operating margins is worth exploring for long term.

Some users may find the company very expensive based on the current PE but MNC with following traits will always trade at premium valuations. Despite the markets hitting all time highs foseco India still trades down almost 30% from its all time high which makes is very attractive for long term.

Please note that above expressed are our own views. Users are requested to take their own decision regarding investments. No member of DARKHORSESTOCKS would be responsible for any loss.

Note-: Previously Foseco India was suggested in darkhorsestocks on 13th October 2019 when the stock was trading at 1283 Rs since the , foseco had hit all time high of 1650 Rs thus thereby delivering almost 30% returns for which it was suggested then.