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Monday, September 12, 2011

Honeywell Automation India limited (HAIL)-a de-listing candidate

Honeywell Automation India limited (HAIL)
Company Profile
HAIL is Indian subsidiary of Honeywell, which is a fortune 100 company that invents and manufacture technologies to meet the challenges of safety, security and energy.
HAIL was set up as a manufacturing, design and engineering facility at Pune in 1984. HAIL is a leader in providing automation and software solutions that improve the productivity and enhance the comfort and ensures the security of homes and businesses. HAIL is one of the oldest automation companies of India and its business include-
1.       Honeywell Process solution (HPS): HPs caters the needs of process industries indulged in refining, pulp, power generation, transmission & distribution, oil& gas, pulp etc.
2.       Honeywell Building solutions (HBS):  HBS is the largest and most technically skilled building automation solution provider in the Indian subcontinent. Solutions include HVAC control system, ire detection system, security system and many more.
Major clients:  Chennai airport, Mumbai Airport, TCS, Cognizant Technology, ICICI bank, Nokia, Bharti airtel etc.
3.       Global engineering services (GBS): GBS provides High quality engineering services in automation and control
4.       Environmental & combustion control: HAIL provide solar water heating system for varying family sizes, climatic conditions and building types
Major clients: Royal, bank of Scotland, Delhi international airport, Delhi metro rail corporation, JW Marriot
5.       Sensing & control: HAIL’s product range spans more than more than 50,000 products including electromechanical switches, electronic sensors, machine safety etc.
Financial Analysis
Outstanding shares: 88, 41,697 equity shares of face value Rs. 10 each   
HAIL Financials
HAIL is a potential delisting candidate as under new norms every listed company should have at least 25% of public float and HAIL has only around 19% of public holding, while promoters of HAIL have more than 80% of shareholding and are reluctant to dilute their holding. Its peer companies are Havells India, ICSA India and diamond power.
Order book is around 1350 crore (CY 10) which comprises 70% domestic demand and 30% export demand, thus it is a company which shall soar with the India growth story.
HAIL shall benefit from Indian government’s spending on the infrastructure projects like rail, airports, mass transit system etc. In CY 10 company had 0 debt but in Q2 CY12 it had 20 crore of debt, which can be considered insignificant (just 4% of sales).
Concerns:
·         Only significant concern is of industrial slowdown and reduced CAPEX activities, which could adversely affect the profitability of the company.
·         Higher interest regime is also pernicious for the company.
Inference:  long investors may buy this stock systematically on every  fall. Present precarious global economic scenario shall be giving good entering opportunities.This stock is very illiquid and it may not offer any significant gains to short term investors besides the delisting gains (which are probable but not guaranteed).

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