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Company Background
Asian Electronics Limited (AEL) is involved in design, manufacturing and marketing of
Energy Efficient Products and specializing in lighting solutions. With its world-class
manufacturing facility at Nashik, Silvassa, Solan (HP) and Chennai, India, it is meeting
international standards of quality lighting solutions. AEL's nationwide presence and
strategic international partnerships is making its mark in the Lighting world. AEL has
recently added new high growth business segment i.e. manufacturing
equipment for converting waste plastic into hydrocarbon and in turn
producing power from it.
Shah Group
(Promoter of AEL)
Organizational Structure
(Pre Merger)
Shah Group
(Promoter of AEL)
Organizational Structure
(Post Merger)
Equity Issuance:
For every 1 Equity Share of Re 1/- each of Green Hydrocarbons India Pvt Ltd,
will be entitled to 1 Equity Share of Rs 10/- each of the Company aggregating to
10,000,000 Shares. (Ten Million Shares)
For every 5 Equity Shares of Re 1/- each of U.S. Instruments Pvt Ltd., will be
entitled to 1 Equity Share of Rs 10/- each of the Company aggregating to
2,000,000 Shares. (Two Million Shares)
The promoters and associates of Green Hydrocarbons India Pvt Ltd and U.S.
Instruments Pvt Ltd will subscribe to 2,000,000 Equity Shares of the Company of
Rs 10/- each at a price of Rs 1000/- per Share aggregating to Rs 2bn. (Two
Million Shares)
As per the above information the fully diluted equity of AEL would go up to Rs
289mn (28.9mn Shares).
On the diluted equity of 289mn the promoter’s stake will go up from current
33.5% to ~59%.
Business Profile
Lighting division is expected AEL has been in the business of operating leases in high tension (HT) and low tension
to grow at 57% CAGR (LT) switched capacitors for Automatic Load Monitoring Systems (ALMS), supplying to
between FY06 - FY09F Maharashtra and AP State Electricity Board on a 10 years lease. The company has exited
from manufacturing of capacitor business in 1998 but continues Capacitor ESCO
business, i.e. ALMS for supply and leasing and refocused to energy efficient, intelligent
lighting products, and manufactures across plants in Nashik, Silvassa, Solan (HP) and
Chennai.
AEL will continue to grow its lighting segment and energy saving fittings and fixtures that
the company is supplying. Visualizing the growing retail segment and scarcity of power
as an opportunity the company has entered into JV to supply energy saving lighting
solution to retail chains and malls.
Distributors and Customers
With more than 300 distributors/dealers, AEL caters to over 500 institutional customers
spread over all industry segments. Asian Raymold has supplied lighting solutions to Big
Bazaar, Pantaloon, Westside, Lifestyle, ABB, Athens Airport, German Railways, UK
Defense department and Post Office Dept. Malta.
Innovative product marketing
AEL has innovative plans to market its product in India on a deferred payment basis. In
Ahmedabad, it has offered efficiency improvement lights to subscribers, who will pay the
initial capital costs through the monthly electricity bills. Similar plan is being launched in
other states.
Plastic2power
Innovative technology to AEL has acquired the technology from Prof. Mrs. Alka Zadgaonkar for converting waste
convert plastic into plastic into hydrocarbons and in turn to convert into power. AEL manufactures equipment
power to set up plant to make plastic to power.
Unique waste management has the patents for the technology, process and catalyst
License to use
invented by Prof. Mrs. Alka Zadgaonkar. AEL has license to use the technology, process
technology, process,
and catalyst.
catalyst
As this new segment is at initial stage AEL is only selling equipment at present whereas it
has few other possible revenue streams from this business which will be explored in
the future; such as
Multiple revenue streams Taking up the operation of the plant on a production sharing basis.
Setting up a Joint Venture with the buyer of the equipment to operate on equity
sharing.
JV with Cimelia
AEL has entered into a (50:50) JV agreement with Cimelia Resource Recovery Pte Ltd.
Establishing base on global (part of $260mn Enviro-Hub listed in Singapore and a well established brand in global e-
scale through Joint waste management and recycling industry).The JV Company will establish a plant in
Ventures Singapore for this purpose and thereafter market its services and to sell similar plants to
Malaysia, Indonesia, Thailand, Hong Kong, Vietnam, Philippines, New Zealand and Brazil.
The company is planning to supply equipment for ~100MW in each of the above
mentioned 8 countries at the initial stage.
Other possible Ventures
Domestic tie up with oil Company is also in talks with major oil company to set up a JV for processing of refinery
major heavy residue by Zadgaonkar’s process. This could open up a huge business opportunity
for AEL as the oil company generates ~7000tonnes of refinery heavy residue per day.
This business segment has a huge growth potential as it solves
Handling of disposable waste plastic & using it for productive purpose without
harming environment.
Setting up of a power plant (8MW) in only 6 months time period and Generate power
at efficient cost.
Investment Rationale
Immense global potential for plastic2power business
Globally more than 200 million tonnes of waste plastics are generated annually (570,000
Potential to supply MT per day of which ~ 10000 MT/day in India), which is a matter of growing concern for
equipment for 100,000 MW environment; as plastics are non biodegradable the world is looking for ways and means
globally to dispose off waste plastic efficiently. On the other hand the increasing economic
activity backed by higher GDP growth lead to higher demand of power worldwide.
AEL’s unique technology to convert waste plastic into energy “plastic2power” has a
capability to address the global issue of waste plastic handling. “plastic2power” is not
only equipped to dispose the plastic but is also converting it into energy.
The waste plastics generated in the world every day if converted into power; have a
potential to generate more than 100,000 MW of power (4.8tpd of plastic = 1 MW/Hr) by
using AEL’s technology.
Apart from plastic the process can also be used to convert refinery heavy residue into oil
and the trial run results shows that it gives much higher conversion compared with lower
percentage obtained by using current process. Due to the heavy volume of refinery
heavy residue generated, it can be of huge benefit for oil refineries if they get even a
smaller increase in the recovery.
Lower lead time vis-à-vis other power equipment manufacturers
Substantially lower lead Normally for a power equipment manufacturer it would take upwards of 24 months to
time to commission the setup a facility to manufacture power equipment. Whereas in case of plastic2power AEL
facility; can become requires just ~6 months to set up a equipment production facility with much lower capex
solution for energy deficit and lesser lead time; which will give the company immense commercial advantage
in the country compared with others.
At present India has a total power generation capacity of ~134000MW of power and
facing a peak deficit of ~13%. The demand of power is growing at a faster rate than the
supply addition backed by the higher GDP and IIP growth. To sustain the robust
economic growth by achieving higher GDP and IIP growth; uninterrupted and adequate
supply of power is must. We expect AEL can play a vital role in this context.
Higher demand of power augurs well for AEL’s plastic2power business
AEL under its plastic2power business will sell equipment for power plants which is based
8 MW power plants can be on a new technology which uses plastic as feed. It plans to sell equipment for a series of
set up in just 6 months; 8MW power generating plant and subsequently take up the operations and management
can become solution for contract for the same. The biggest advantage of this technology is one can set up a 8
energy deficit in the MW plant in just 6 months compared with the usual time of 18 - 24 months in case of
country other mode of power generation. Along with lower lead time the cost of generation
would be as low as ~Rs 1.80/unit. Other than its economic benefits this business
significantly contributes towards environment protection by using waste plastic as raw
material and convert it 100% into value added product which is used to produce power.
Apart from selling equipment the company can add some other source of revenues to its
segment such as taking up operations and maintenance of the power plant etc. These
options can be explored from time to time.
Govt. thrust on efficient power consumption is a big opportunity for the
growth of ESCO
45% of energy bill can be There is a huge business opportunity for Energy Service Companies (ESCO) in India. Due
saved by using ESCO to the huge supply deficit of power in India, conservation of power holds big importance.
products The recent energy bill states that that all premises & factories having a load > 500 kva
must save 30% energy; to achieve this; they would buy products/services only out of the
ESCO concept. By using ESCO products consumers can save up to 45% on its energy
cost. ESCO industry in India is still at a nascent stage and AEL being the pioneer in the
industry is set to benefit most from the sector growth.
Sunidhi Research Page 5 of 14
Asian Electronics Limited (AEL)
Plastic2power
Prof. Mrs. Alka Umesh We met the management of AEL to know about this innovative technology. Later we
Zadgaonkar – The visited Nagpur, where the first plant has been setup and is now used as a research &
Inventor Development facility. We met Dr. Umesh Zadgaonkar the promoter of Unique Waste
Management Limited and discussed about the technology and invention.
Technology
Plastics have become an indispensable part in today’s world. Due to their light-weight,
Recognized in global durability, energy efficiency, coupled with a faster rate of production and design
forums with patented flexibility, these plastics are employed in entire gamut of industrial and domestic areas.
technology, process Plastics are non-biodegradable polymers of mostly containing carbon, hydrogen, and few
and catalyst other elements such as chlorine, nitrogen etc. Due to its non-biodegradable nature, the
plastic waste contributes significantly to the problem of Municipal Waste Management.
According to a nation wide survey, conducted in the year 2004, approximately 10,000
tones (ten thousand tones) of plastic waste were generated every day in India, and only
60% of it was recycled, balanced 40% was not possible to dispose off. So gradually it
goes on accumulating, thereby leading to serious disposal problems.
Prof. Mrs. Alka Umesh Zadgaonkar, Head of Department of Applied Chemistry at the
Nagpur based G.H. Raisoni College of Engineering invented an Environment friendly
catalytic process for disposal of waste plastic.
The invented process involves degradation waste plastic using `catalytic-additive’. Under
this process individual as well as mixed plastics were successfully converted in to fuels.
The products obtained in the process are Liquid hydrocarbons, Gas and residual Coke.
The heart of the technology is the Catalyst (Patented) which is being used into the
reactor and mixed with melted plastic to get the desired output.
The waste plastic is sorted based on physical properties such as, hard, soft, films
etc. Size reduction of the sorted feed is carried out using crusher, cutter and
shredder.
The graded feed is mixed and fed to Melting Vessel through a pre heater feeder.
In Melting Vessel, the feed is heated to 175-250 0C.
The melted plastic then goes into reactor where the Catalytic Additive is mixed.
Post reaction the impurities such as hard metal, clay, sand, glass etc. settles in
the bottom of the reactor, and the processed plastic goes into condenser for
cooling off.
Once the outcome is cooled off it results into Liquid Hydrocarbon and LPG
(Higher Ethylene content) which in turn stored into separate storage devices and
can be used for generating power.
The process
Note: To calculate the pay back period we have not taken any tax benefits the power generation unit would entitle to. We have also
not considered the possibility to get carbon credits in the future. By considering these benefits the payback period will get substantially
reduce.
Competitive advantage
Plant Load Factor (PLF) Above 85% 25% - 32% 70% 30% - 40% High
Continuous Supply Available Not Available Available Not Available Available
Gestation Period Below 6 Months 3 - 6 Months 4 Years 5 Years 8 Years
Capital Cost / MW Rs. 60mn Rs. 60mn Rs. 45mn Rs. 35mn High
Renewable Source Yes Yes No Yes No
Residual Waste None None High None High
Payback Period 5 Years* 7 Years 15 Years 10 Years > 10 Years
Source : Company & Sunidhi Research, * Payback is arrived without taking tax enefits and carbon credit income.
Income Statement
Rsm FY04A FY05A FY06A FY07A FY08F FY09F
Balance Sheet
Rsm FY04A FY05A FY06A FY07A FY08F FY09F
Sources of Funds
Application of Funds
Current Assets
Inventories 345.3 465.0 675.8 1045.3 1969.0 4037.9
Debtors 477.4 572.2 957.2 3403.4 5012.0 9129.2
Cash and Bank 69.1 77.8 363.2 32.6 137.6 50.6
Loans and Advances 534.6 705.4 965.9 714.7 1342.5 2809.0
Assumptions
Expenditure
Inc/Dec in stock 19 -5 51
Raw Materials 274 289 -5% 687
% to sales 35% 53% 49%
Staff Cost 41 24 74% 61
% to sales 5% 4% 4%
Other expenditure 113 114 -1% 258
% to sales 13% 21% 17%
Total Expenditure 448 423 6% 1057
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