Current price-: 425 Rs
This is a completely debt free 36 years old company engaged in manufacturing precision-welded and seamless steel tubes of small diameters. It is is one of the largest players in the business and caters to original equipment manufacturers as well as its vendors in the refrigeration, automotive, and general engineering industries.
Gandhi Group was founded in 1959 and has been proudly manufacturing automobile components for the last six decade
Incorporated in 1985, this company was set up in technical collaboration with Bentler & Company, Germany. Benteler is a leading, global enterprise that develops, manufactures and delivers metal-based products, systems and services for the automotive, energy and engineering sector. The primary aim of the collaboration was to substitute the imports of small diameter welded and cold drawn seamless steel tubes in India. All the critical equipment, proprietary machinery and latest technology was supplied by Benteler and imported from Germany.
Since the beginning of commercial production Gandhi Special Tubes Ltd has significantly broadened the applications of its seamless and welded tubes and increased its product mix to include the manufacturing of cold-formed nuts as well.
Gandhi Special Tubes Ltd
It was engaged in the manufacture of small diameter precision welded tubes and processing of the same with an installed capacity of 30 mln mtr pa. The applications of company’s products are in automobiles, refrigeration, air-conditioning and the general engineering industry. They are used in fuel lines, brake lines, oil lines, condensor coils, evaporator coils, lubricating lines, hydraulic lines, penumatic lines, etc.
It has capacities of 24 million metres per annum (mmpa) and 16 mmpa for welded and seamless tubes, respectively, at its plant at Halol (Gujarat). The company also manufactures cold-formed nuts, which serve as complementary products to the tubes business.
Built on world class manufacturing and engineering infrastructure in India, Gandhi Special Tubes Ltd. is recognized globally as one of the most trusted name in manufacturing of customized tubular solutions.
Today Gandhi Special Tubes Ltd. delivers innovative and reliable tubular solutions to a diverse range of industries & niche markets in core sectors such as automotive, tractors, earthmovers, hydraulics, and general engineering. From its humble beginnings in India, Gandhi Special Tubes Ltd has expanded its presence across Asia, North America, and Europe as well.
Equipped with German technology, advanced industrial testing procedures and a professionally trained workforce, manufacturing facility is fully geared up to meet the growing needs of multiple industries with unmatched dependability.
Company has state of the art manufacturing facility located at Halol (Gujarat), which is spread across 28 Acre. Apart from that GSTL also has a wind power capacity of 5.35 megawatts.
Business Products
The product portfolio of Gandhi Speciality steels has been divided into four broad categories
- Cold Drawn Bright Annealed Seamless Tubes
- Precision Electric Resistance Welded Tubes
- Cold Formed Coupling Nuts
- High Pressure Diesel Fuel Injection Tubes
Since majority of the readers would not have prior background or experience in Mettlaurgy/Industrial Components we have also tried to explain the product in short and crisp language.
Cold Drawn Bright Annealed Seamless Tubes
Cold Drawn Seamless Mechanical Tubing (CDS) steel tube which offers uniform tolerances, enhanced machinability and increased strength and tolerances compared to hot-rolled products. Produced from hot rolled 1026, the cold drawing process increases the tube’s physical properties and offers better tolerances and reduced machining allowances over hot finish seamless.
Benefits
- HIGHER STRENGTH & HARDNESS PROPERTIES
- SIZE ACCURACY
- ENHANCED APPEARANCE
- UNIFORM MICRO-STRUCTURE
- EASIER TO MACHINE
- SUPERIOR FINISH IN SUBSEQUENT MANIPULATIONS
Cold Formed Coupling NutsApplications
- Hydraulic Fittings
- End Connection for Fuel Injection tube assemblies
High Pressure Fuel Injection Tubes
Applications of the products
Company places a special emphasis on the quality . As a result due to the relentless commitment to quality company has achieved status as an IATF 16949:2016 certified company. IATF standards are a globally accepted set of guidelines for ensuring quality in metal fabrication and contract manufacturing.
Clients
Buy Back of shares
The Board at its meeting held on June 22, 2021 had, approved Buyback of shares up to 7,66,616 fully paid Equity Shares of the Company of face value of ₹ 5/- each, on a proportionate basis through the Tender Offer route at a maximum price of ₹ 550 /- per equity share for an aggregate amount not exceeding ₹ 42,16,38,800/-, subject to the approval by members at the ensuing Annual General Meeting
Why Buyback of shares?
The Buyback is being undertaken by the Company after taking into account the strategic and operational cash needs in the medium term and for returning surplus funds to the shareholders. The Buyback is being undertaken for the following reasons:
i) The Buyback will help the Company to return surplus cash to its shareholders, in proportion to their shareholding, thereby, enhancing the overall returns to the shareholders;
ii) The Buyback is generally expected to improve return on equity and earnings per share by reduction in the equity base, thereby leading to long term increase in shareholders’ value;
iii) The Buyback, which is being implemented through the Tender Offer route would involve allocating to the Small Shareholders the higher of: (a) the number of shares entitled as per their shareholding; or (b) 15% of the number of shares to be bought back, as per Regulation 6 of the Buyback Regulations. The Company believes that this reservation for small shareholders would benefit a large number of the Company’s public shareholders, who would be classified as “Small Shareholders”.
The Promoters of the Company have an option to participate in the Buyback. In this regard, the Promoters of the Company have expressed their intention via their letters dated Tuesday, June 22, 2021 to participate in the Buyback and it may tender up to an aggregate maximum of 26,23,771 Equity Shares or such lower number of Equity Shares in accordance with the provisions of the Buyback Regulations.
Financials
For the year ended March 2021
During the year under review, the Company has earned revenue from the sale of products of ₹ 11,022 lakhs as against ₹ 7,767 lakhs in the Previous Year. This has resulted in an increase of 41.91 % over the Previous Year. Further profit before tax for the year increased by 82.75 %.
Capital Investment of ₹ 112.46 Lakhs (including ₹ 75 Lakhs capital advance) was made during the year. The entire capital investment has been made out of the Company’s internal cash accruals.
Key Financial ratios
For the first quarter ended June FY 2022
- Net Sales at Rs 33.08 crore in June 2021 up 197.36% from Rs. 11.12 crore in June 2020.
- Quarterly Net Profit at Rs. 11.07 crore in June 2021 up 252.27% from Rs. 3.14 crore in June 2020.
- EBITDA stands at Rs. 15.17 crore in June 2021 up 251.97% from Rs. 4.31 crore in June 2020.
- Gandhi Spl Tube EPS has increased to Rs. 8.57 in June 2021 from Rs. 2.43 in June 2020.
Conclusion
Gandhi Special tubes, a completely debt free company as well as a consistent dividend paying company is engaged in the manufacturing of products with consistently high operating profit margins which range in between 30-40%. Company maintains huge amounts of investors which gives it an edge against increasing raw material prices. Considering company has held high raw materials the same has been reflected in the 3 quarter results where company reported Operating margins of almost 40%+. However going forward as the inventory turnover increase , given that the metal prices in recent times have increased significantly it can be expected that there may be pressure on the operating margins. Sales growth has been flat for the company over past couple of years and the same is justified in the company valuations where the company trades at price multiple of 15 PE. If there happens to be slightest increase in the sales and operating profit margins to remain stable at the current levels , company may be able to create good amount of wealth for the shareholders. Also company in recent past had brought back shares at the price of 550 Rs per share compared to which currently the stock is trading 22% down from its buyback prices. However it may be a very long time before the company could see any meaningful appreciation therefore users having extreme patience should only explore this stock.
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