News

Published: Mar 16, 2023
Updated: Mar 16, 2023

Technocraft Industries' Shares Surge 40% in 5 Weeks

Technocraft Industries, a leading manufacturer of drum closures and scaffolding products, has seen its shares surge 40% in the past five weeks, reaching a record high of Rs 1,271. The iron and steel company's shares rallied 8% in Wednesday's intra-day trade, despite an otherwise subdued market. Over the past three months, Technocraft's shares have rallied 37%, outperforming the S&P BSE Sensex by a significant margin.

Market Position and Business Segments

Technocraft Industries has a worldwide market share of around 36% in the drum closures segment, excluding China. The scaffolding and formwork business comprises 70-75% of the company's revenue, with most of its sales accruing from overseas markets. Additionally, the company has started manufacturing sophisticated engineered formwork systems for construction and infrastructure projects.

End-Markets and Buyback Offer

The company supplies its products to a diversified set of end markets, including oil and gas, power, refineries, petrochemicals, infrastructure, and commercial construction. Last month, Technocraft purchased 1.5 million equity shares at a price of Rs 1,000 per share through a buyback offer via the tender route. The company believes the buyback may help in improving return on equity, leading to a long-term increase in shareholders' value.

Quarterly Update and Future Prospects

During the December quarter (Q3FY23), the drum closure business saw pressure on the profit margin due to increased costs of materials, ocean freights, and other inflationary impacts on consumables and services, along with pressure on demand. However, the company expects the pressure to ease out in the medium-to-long term. The China operation is continuously showing better results, and no major capex is planned for this division other than maintenance capex in the near future.

Credit Risk Profile

CRISIL Ratings believes that Technocraft's credit risk profile could strengthen from sustained revenue growth and operating efficiency in the textile and scaffolding divisions, and sustenance of their established market position in the drum closure segment. Its financial risk profile is expected to remain strong, driven by steady revenue growth, healthy debt protection metrics, and cash accruals over the medium term, according to the rating agency's September rating rationale.

Outlook: Positive, well positioned for future growth

Technocraft Industries' shares have seen a significant surge in the past five weeks, outperforming the broader market. The company's strong market position, diversified end- markets, and strategic initiatives, such as the recent buyback offer, could help it maintain its growth momentum. Although the drum closure business faced some margin pressures during the December quarter, the company expects the situation to ease out in the medium- to-long term. Overall, Technocraft Industries seems to be well-positioned for future growth.