Duncans Industries - Motilal Oswal

STRONG BUY

Duncan is story without merits. Its fertilizer plant has already started operations.

G P Goenka likely to call press conference shortly to announce the restructuring plans. As per all analyst, G P is likely to sell assets worth Rs 240 crs to meet up the debt of the company in a phased manner.

It has been also projected the fertilizer unit will do business of over Rs 800 crs in the current fiscal and tea around Rs 200 crs and EBITA on the same shall be not less than Rs 90 crs on an Equity of Rs 53 crs. Another Rs 60 crs is projected on account of interest saving on debt restructuring.

Before the closure of the plant, Duncan did business of Rs 1797 crs in 2001. It has got installed capacity of 6.75 lac tons of fertilizers and worked above installed capacity in 2001. It tea production is on an average of 17 mn kgs in last 4 years.

Promoter's stake is as high as 79% and free float as low as 8%. The Networth of the company is Rs 700 crs whereas its debt is Rs 1000 crs. G P is set to reduce the debt substantially by debt restructuring and also be repaying out of the sell of assets of Rs 240 crs.

In short, Duncan is set to return to its lost glory in next 12 to 18 months. It is a repeat of Triveni Sheet glass. Govt has frozen Rs 400 crs subsidy of Duncan which had brought the downfall of Duncan. With GP's fortune changing in right spirit, who knows he will get back his Rs 400 crs from Govt which could a real bonanza.

From tomorrow, almost all the analysts will start tracking this  fertilizer cum tea stock which is riding high at the moment.