AIA Engineering Ltd- Analysis

Reading Time: 2 minutes

Headquartered in Ahmedabad, AIA Engineering Ltd has clients in 125+ countries covering all continents of  the world. About 75% of the company’s product are exported and India contribute less than 25%. 

Co. Operates in only one domain- high chrome mill internals-includes grinding media, liners and diaphragms. The company wants to focus only on a very small segment and create expertise around that.

Outside India, AIA sells its products under the brand name ‘Vega’. Hence, you might have guessed ,most of the foreign subsidiaries of the company is named ‘Vega’. 

Capacity: The company has present installed capacity of 3,90,000 TPA. The latest 50,000 TPA capacity was commissioned in the Q3Fy20 at its GIDC Kerala plant in Ahmedabad.( Kerala is a name of area in Ahmedabad also). The 3,90,000 TPA is towards Grinding media( a little amount of 15,000 T of the total is towards Mill liners). 

The company is on track to setup SAG mill liners with capacity of 50,000 MT with estimated capex of Rs. 250 crore and is expected to be commissioned by December 2020. With this the capacity expansion will come to an end for the next few years.

Also Read on FinMedium:  Nifty P/E Ratio: Few Important Facts

The company does all the engineering of adding capacity themselves. Given, the high amount of investment required for any sort of capacity addition, also adds a deterrent for the competitors.

Power cost: To reduce its power cost (11% of topline, second largest cost after raw material), the company has installed 8 wind mills of 2.1MW each at a total cost of 104 cr. This will bring down the energy cost.

Promoter salary: Very low promoter salary with the promoter group salary coming at just ₹5 cr which is like 0.17% of sales and 1% of profit. Promoters held 58.47% stake as of March 2020.

Research: Co. continuously researches on metallurgy that improves product performance & reduce costs for customers.

Promotion: Co. promotes and advertises its products through direct marketing activities such as technical seminars, one-on-one meetings. 

Plants: The company has 8 manufacturing plant located in 4 locations in India, Ahmedabad, Nagpur (Maharashtra), Bangalore(Karnataka) & Trichy(Kerala).

High entry barrier due to technical nature of the product and more importantly the long period(about 2 years) and persistence required to convert the large mining companies.

Given that company’s plant is located in India, they have a cost advantage over their overseas peers.

Also Read on FinMedium:  Which Pharma Segment will Bring Good Fortune?

Product pricing is decided via negotiation but the AIA usually gives out discounts initially to onboard clients whereas the prices of raw material are market determined. Psych of the mill operators is to operate within their budget, that is the reason for initial discount. The change in prices of raw material (Ferro chrome & steel scrap) are passed on to the customers with a lag.

Nalanda Capital held 9.68% stake as of March 2020 and has been holding or rather increasing since quite a few years.

The company is in an expansion mode right now so the ratios as well as free cash flow would be subdued for sometime. All the expansion will be done through internal accruals.

Source link

Disclaimer: The opinions expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of the FinMedium or its members. The presentation of material therein does not imply the expression of any opinion whatsoever on the part of the FinMedium concerning the legal status of any company, country, area, or territory or of its authorities. For more info. please read our ToU & Privacy Policy here. If you have any concerns regarding this post, please reach out to us at

Also Read on FinMedium:  Should I Invest in Axis Long Term Equity Fund?

Every Wednesday and Saturday, we send Info-Graphic and FinMedium Weekly Digest newsletters to our 25000+ Subscribers.

Join Them Now!

Shekhar Yadav

Shekhar Yadav

It was only during the third semester in Engineering that Shekhar overheard a Gujarati guy in his class discussing stocks. After a few discussions with him, he realized that this was what he wanted to do in his life.
Please Share Now :)