TTL is engaged in the repairs, upgradation and manufacturing of power and distribution transformers. It is a 71 per cent subsidiary of Bilpower Ltd, which manufactures laminations and motor stampings. TTL has been the registered vendor to various state electricity boards (SEB) across the country and is also registered with many private companies for supply and repair of power transformers.. The power transformer segment is expected to show strong growth, given the government’s focus on increasing power generation and on improving distribution efficiency. However, the industry is characterized by intense competition due to presence of large established players dominating the industry.
The company posted negative operating cash flows for the last 3 years due to the long working capital cycle. The ramp-up of the company’s operations will result in further strain on working capital. TTL’s operating margins have dropped to 16.6 per cent in 2008-09 from 23.3 per cent in 2007-08.
HDFC Sec says the ISSUE IS NOT CHEAP and lacks corporate governance as Nik-San Engineering Company (P) Ltd, a promoter group company, operates in a similar line of business as that of Tarapur Transformers Ltd. There is no non-compete agreement between the two companies, which
poses a potential for conflict of interest. In addition, Tarapur Transformers Ltd sources its key raw material (transformer core) from its parent company – Bilpower Ltd. However, no formal pricing agreement for this purpose is in place. Further, the extent of engagement of
independent directors falls below the requisite level
