Usha Martin

[sh50]

This Calcutta based company which belongs to the Jhawars is involved in the manufacture of wire ropes used for various purposes. Wire ropes is a highly value-added product which enjoys a premium pricing in the markets. Recently, OTIS Elevators has decided to make Usha Martin the sole procurement source for the ropes used in lifts. This is a very noteworthy achievement for the company. Usha Martin in a very rare style first completed the forward integration project of wire and ropes and in the last six months has completed all its backward integration projects namely, power plant, sponge iron plant, purchase of iron and coal mines in the state of Jharkhand. The company now enjoys the status of having complete integration both backward and forward. One can be bullish in this stock from a medium to long term point of view. Present Price is approx 83.5 and Projected Price Rs.125

 

[nss1162]

Yes,. Usha Martin ( UM ) is truly an integrated ( forward and backward ) player.

He has consolidated in Finished Goods by making very value added product and in case of RM he has 1)Power 2) Iron ore 3) Coal mines. This practically covers all its direct cost of production which is more than 53%. All other cost such as Staff cost, Other exp, Depreciation and Interest are practically FIXED cost which do not vary in proportion to volume of sale Increase.

Hence as the volume of production and sales go up he will have lesser cost per tone of the above Fixed costs.

Hence UM has a better chance of increasing the Margin substantially. Further in Top line - the prices are going to increase as demand for steel products are going up.

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Can any one clarify when the COAL MINING would start? Coal mines have been allotted to UM in Oct 2003. Is he putting up a plant to make Coke from Coal. NOTE : Coke is essential to make Steel and Coke is made from Coal.

If any one knows confirmedly please post a reply to this CLARIFICATION.

regards
n s s