W P I L Ltd was incorporated on February 6, 1952 at Calcutta under the name of Johnson Pumps India Ltd. subsequently the name of the company was changed to Worthington Pumps India Ltd. on January 29, 1983.
The company is mainly engaged into manufacturing of Pumps, Spare Parts & Accessories. WPIL is also involved in execution of water supply projects on a turnkey basis for industrial units, power utilities, irrigation departments, etc.
In 2002, Mr. Prakash Agarwal of Kolkata acquired controlling stake in the company from B. M. Khaitan group. WPIL has three manufacturing units in Kolkata and one unit in Ghaziabad, Uttar Pradesh. Since 2011, WPIL has expanded its operation in the international market by acquiring pump companies in different regions of the world.
Principal business activity
1. Pumps (33.65%)
2. Spare Parts & Accessories (66.35%)
Percentages indicate revenue contribution for FY18
Engineered Pump Division:
The division is based in Kolkata and has 3 plants with manufacturing area of 20000 M².
Key products are: Metallic Volute Pumps for high head Irrigation Applications & Concrete Volute Pumps for large flows upto 80000 M³/H for Drainage Applications.
Conventional Pump Division:
Division is located near Delhi having manufacturing area of 15000 M².
Products are Vertical Turbine/Mixed & Axial Flow Pumps, Horizontal Split Case, End Suction, Multistage, Non Clog and Submersible Motor Pumps. Only manufacturer of large Submersible Sea Water lift Pumps in India upto1500 KW.
Complete Turnkey projects from concept to commissioning in the field of water handling covering the complete domain of Hydraulic / Civil / Mechanical / Electrical and instrumentation engineering
Division has around 50 experienced engineers and site personnel. It works in the verticals of Power, Irrigation, Municipal & Industry.
The Indian Pump industry is growing at an annual CAGR of ~10%– which is higher than the international CAGR average of ~6% –due to the surge in infrastructure development, growth in agriculture and other water intensive industries. The domestic market is growing at a healthy rate of 16-18% per annum
Indian Pump Industry – Market Size
The Indian pump market was worth over US$ 1.2 billion in 2014 (i.e. over INR 8,000crore)
- India has over 800 pump manufacturers
- India manufactures more than 4.5 million pumps every year
- Pumps are 2nd largest ‘machineries’ produced in India after electric motors
- Indian Pumps are exported to more than 100 countries
- Indian Pump industry offers excellent growth opportunities for international collaborations
Indian Pumps – Market Segmentation by Share & Value
Agriculture and Building Services comprise 46% of the market by value (INR 3910 crore). This segment of the Indian pump market is highly fragmented as well as competitive – with a large number of small and medium enterprises (SMEs) competing to increase their market share.
The biggest markets for agricultural pump-sets are the central Indian states of Madhya Pradesh, Maharashtra, Tamil Nadu, Karnataka and Andhra Pradesh.
The Industrial Sector comprises the remaining 54% of the market by value (INR 4590 crore). This segment of the India pump market consists of sectors like Water & Sewage Treatment, Power Generation, Oil & Gas, Metals & Mining and Others. Being technologically intensive, it is a relatively hard sector for small and medium enterprises (SMEs) to penetrate.
Top Indian Pump Companies by Market Capitalisation (BSE)
- KSB Pumps
- Dynamatic Tech
- Kirloskar Bros
- Shakti Pumps
- Yuken India
- Roto Pumps
- Bemco Hydraulic
Key non-listed players include:
- Grundfos Pumps India (subsidiary of Danish holding company Grundfos Holdings )
- CRI Pumps
- Vivo Pumps
The pumps market in India is characterised by the presence of several international vendors, large regional vendors, and small and mid-sized regional vendors. The market appears to be highly competitive. The large Indian vendors compete directly with global players, and since they have a wide distribution channel, the global vendors find it difficult to penetrate the market. Moreover, products from the large regional vendors are much cheaper when compared to global vendors, which also makes it difficult for global players to establish their presence in the market. In terms of product pricing, the small regional vendors pose a threat to both the large Indian vendors and global vendors as their prices are comparatively lower than large vendors, as per reports.
- OPM is 2nd best, after Roto Pump
- Fastest growing among its peers
- Best RoE and RoA based on FY18 numbers
- D/E is 3rd lowest, after KSB & Kirloskar
- Lowest P/E
- WPIL 4th largest in terms of market cap
- On the negative side, worst WC cycle
Standalone receivable days are 186 days, while at consolidated level it is 152 days.
Receivables break-up from subsidiaries
Total receivables from subsidiaries amount to (23+11+39+75+36= 185+) around 200 crores. Of this Aturial International alone accounts for 160 crores of receivables, accounting for 86% of standalone, and around 50% of consolidated receivables.
This subsidiary has been one of the 2 major loss making subsidiaries of WPIL – the other one, Mathers Foundry UK was wind down recently.
Aturial International not only accounts for bulk of the outstanding receivables, but also pulled down profits by negative -51%.
In 2016-17, the Non-controlling shareholder of Atuia International Pte Limited contributed USD 20,00,000 (Rs. 1,297 lacs) towards its share capital consequent to which the Group’s share in the subsidiary has reduced to 61.53% from 78.84% earlier.
However, this subsidiary continues to remain a major source of company’s woes.
Indian Pumps – Market Segmentation by Pump Type
- Centrifugal Pumps ~95%
- Positive Displacement Pumps ~5%
The market study estimates that the agriculture segment will account for about 35% of the total share of the pumps market in India by 2020 and will also dominate this market throughout the forecast period. The increase in consumption rate, rise in agriculture exports, the growth in the food processing industry, and growth in organic farming will result in the growth of the agriculture sector, which will subsequently increase the demand for pumps in the coming years. Additionally, the expected investments from the government toward irrigation projects will also drive the demand for the market.
Urbanisation is expected to cater to 70% of India’s USD 15 trillion projected GDP by 2030. This entails pumps and valves for urban construction such as residential and commercial utilities and buildings will witness sustained demand over considerable period of time.
Further, oil & gas, water & wastewater treatment plants, fertilisers, power generation and heavy industries like cement & metal will be the key growth drivers. A number of upstream projects by ONGC, Cairn Energy, Essar Oil, HOEC and Reliance Industries Limited will boost the demand for pumps and valves.
As of 2015 India exported pumps and valves worth over USD 1.55 billion, serving various engineering segments, to over 100 countries. The exports in this segment are growing at a healthy rate of around 10-12% annually.
Industry Clusters – Indian Pumps
Some of the major industry clusters for pumps in India include:
• Batala & Jalandhar
Credits & Reference
Revenue split for the standalone business
Order Book position
The order book position (Standalone domestic operations) as on Sept 30, 2018 was Rs.883.00 crore (as against Rs.859.6crore as on Dec.31, 2017), being 2.06x of net sales in FY18.
Majority of the same is expected to be executed over a period of next one year. The client portfolio of the company is quite diversified comprising irrigation department of various states especially Telangana, Madhya Pradesh, Andhra Pradesh, central utilities, large PSUs and various private sector entities.
In addition to the above its international business segment (through subsidiary companies) also has a healthy order book position.
Promoters increased stake from 66% to 68.8% in June 2018 quarter. Present stake is 66.82%
Between November 2017 and July 2018, promoters have consistently increased stake through market purchase. Price range has been between 465 and 682 with an average price point of 565.
1. MD is highest paid, with AR of 0.83 crores – 1.73% of PAT.
2. Total remuneration was 1.59 crores – 3.31% of PAT
Both are well within the recommended ceilings.
In fact, from FY17 Annual Report, remuneration of 2 non-executive directors, V. N Agarwal (father of MD Prakash Agarwal) and Ritu Agarwal (wife of MD) averaged less than 10K a month!
Review on indeed.in
3 reviews, between 2013 and 2018. Overall Employee Review score 3.7. All feedbacks are positive
Review on glassdoor.in
5 reviews, between 2012 and 2018. Overall review score 2.9. All feedbacks are positive, including the guy who gave 1 star rating
List of subsidiaries, JVs, associates & jointly controlled entities
Performance of Subsidiaries, Associates & JVs
Subsidiaries have been a drag on performance. In particular, UK & Singapore subsidiaries have been major loss-making. UK operations are now wind down, consequently the subsidiary performance have started to improve.
• Margins (OPM & PAT) have been consistently improving
• D/E has consistently declined
• Inventory/ Sales is more or less consistent, between 8 to 9%
• # Shares have remained more or less constant, except in one occasion in FY15
• Receivable days is very high (but was even higher before)
• RoE is 16%, but has declined from 10Y historical average of 39%
• Asset turn is 9, above 10Y average of 8.3
• 9Y FCF is 34 crs (around 300 crs equity)
• No significant capex in the past 10Y, cumulative capex of 50.5 crs
WPIL has been growing consistently and its growth rate has been accelerating. Last 3 years saw top-line grow by more than 20%, while 5-10 year longer term growth rates are around 10%
WPIL has been generating positive free cash-flow consistently over past 5 to 10 years (cumulative), although OCF has been less than PAT over the same periods.
WPILs OCF has suffered due to exposure to subsidiaries which accounts for bulk of the receivables. This issue has been discussed in detail in the previous sections.
Leverage & Liquidity, debt outlook
Leverage is 21% as of end FY18, while interest cover is comfortable 6.26x.
18L shares were issued on preferential basis to institutional buyers on 15th December, 2014. Except for this one instance, there has been no dilution over the past 10 years.
Raw material cost accounts for 60-70% sales, contribution has declined over long term.
Given that the prices of steel, major raw material, is volatile in nature, profitability of the company is susceptible to volatility in prices of raw-material.
However, the company has cost escalation clauses in most of its contracts for supply of engineered pumps & execution of EPC contracts.
Contingent liabilities are at 71 crores, down from 165 crores in FY17 and 208 crores in FY16. Reduction is primarily due to reduction in corporate guarantees for Singapore subsidiary.
Tax rates & benefits if any
3Y average tax rates are at 32%.
High exposure to subsidiaries
WPIL’s funded exposure to group companies increased from Rs.129.05crore as on Mar 31, 2017 to Rs.157.79crore (accounting for 56% of net-worth) as on Mar 31, 2018. This was mainly on account of increase in trade receivables from group companies. Further, WPIL has also extended a corporate guarantee (Rs.35.90 crore outstanding as on Mar’18) to its subsidiary company against debt availed for the purpose of business acquisitions. The said non-fund based exposure has reduced substantially from Rs.125.90 crore in FY17, due to repayment of term debt availed for acquisition in its step down subsidiaries viz. Gruppo Aturia SPA and Mathers Foundry Ltd.
In terms of financial performance of its group companies; there has been an improvement in the profitability for Gruppo Aturia & WPIL SA Holdings in FY18, however, Aturia International Pte Ltd & Mathers Foundry Ltd continued to incur losses during the said period. Also performance of Sterling Pumps Australia deteriorated in FY18.
Profitability susceptible to volatility in raw material prices
Raw materials account for ~69% of total cost of sales in FY18. Given that the prices of steel, major raw material, is volatile in nature, profitability of the company is susceptible to volatility in prices of raw-material.
However, the company has cost escalation clauses in most of its contracts for supply of engineered pumps & execution of EPC contracts.
Working capital intensive nature of operation
WPIL’s business is working capital intensive and thus has a stretched operating cycle of more than four months.
Company receives 10-15% of the contract value on finalization of design, 50-60% on delivery of pump and the balance on successful erection and commissioning. However, the major buyers withhold a percentage (generally 10-15%) of the contract price as retention money, and the same is paid after six to 12 months of completion of contract.
Intense competition in the domestic pump industry
The Indian pump industry is estimated to have around 800 players comprising of small and large manufacturers and a few foreign players. Market is divided around 50-50 between organized and unorganized players.
Most of the manufacturers in the unorganized segment cater to the agricultural sector. Thus, WPIL is facing intense competition from the organised as well as unorganised sector players.
Moreover, the company is also exposed to cheaper imports of pumps from China & Korea.
Interest rate risk
Sensitivity of PBT to interest rate change:
Forex fluctuations have negligible impact on PBT, although it impacts receivables
Ageing analysis of receivables
Maturity profile of financial liabilities
Historical Price Chart
1 Year Chart
5 Year Chart
Current management took-over in 2002, after which the stock has performed remarkably well, beating Sensex and its peers by a wide margin. Long term chart also shows cyclical growth pattern, with distinct uptrends followed by downtrend extending 1-2 years. Based on current coordinates in the long term chart, some sluggish-ness / downtrend can-not be ruled out in the short-medium term period.
Jhilik Promters is promoted by R K Ganeriwala, who is also a director of a number of companies, such as Violet Dealcom, Jayantika Investment & Finance, etc. , at least 6 such entities, which also has one Pradip K Agarwal as co-director. Prakash Agarwal & K K Ganeriwala being directors at WPIL, Jhilik having Ganeriwala-Agarwal link may not be coincidence & it is quite possible that this company is indirectly related to promoters as well.
(Potential benefit of such entities could be the ability to get in and out of the stock without giving the perception of promoter buying-selling. This entity got-in on March 18 quarter, exited next quarter, and now again has taken a position in December 2018)