Sunday, May 18, 2008


What would you say if I told you about a company which is operating in two of the fastest growing sectors in India viz. Power and Oil & Gas, has seen sales grow 200 times in 5 years and profits grow 1400 times in that period. To top it its products enjoy patent protection and competitors if any are only in the unorganized sector.

ICSA (India) Ltd is one such company, having several patented products which are unique in preventing losses due to thefts and corrosion and these products have the potential to provide it with continuing revenues and profits for many years.

ICSA has a unique device for power monitoring and theft detection which is installed at junction boxes. It continuously monitors energy and sends signals to the base station. It also detects tampering and sends alerts to the control room. In addition it has products for intelligent automatic meter reading through wire and wireless communication. This aids power companies in billing customers without visiting the site. Another product is for remote street light control system whereby street lights can be controlled from remote locations by programming them to be switched on and off as per seasonal changes. It has a product for agricultural load management meant for supplying power to farmers during specified times during non peak hours.

Also the company is also involved in executing contracts for erection of small power distribution systems in rural areas.

The company has a range of products in pipeline applications. This product when installed in any pipeline (natural gas, water, oil) continuously monitors the pipeline with the help of intelligent cathodic protection system and notifies any abnormalities in the pipeline to the control room. It has entered into a strategic tie up with Oil India Ltd. To market this product in India and abroad, which testifies to the technical soundness of the product.

Because of the original and path breaking nature of these products, the company holds immense potential for sales and profits growth. Particularly so because transmission and distribution losses in India are currently at Rs.50,000 crores. In Budget 2008-09, the finance minister has provided Rs.800 crores under the Accelerated Power Development and Reforms Project (APDRP) aimed at reducing these losses. A proposal has been put up to set up a national fund for transmission and distribution reforms. These clearly indicate that reforming the power sector remains a priority for the Government and it is committed to bring down these losses from 35 to 40 % of power generated currently to 15 % in the 11th 5 year plan. Also power generation capacity is sought to be increased from 16000 MW now to 36000 MW by 2011. This presents a huge opportunity for contractors and suppliers in this sector.

ICSA is well place to capitalize upon the opportunities thrown up by aggressive investments not only in this sector but also in the oil and gas sector where Reliance is all set to commence its natural gas supplies to power and fertilizer plants.

Sales have grown from Rs.3.42 crore in FY 03 to Rs. 669 crore in FY 08. Net Profit has grown from Rs.0.09 crore in FY 03 to Rs. 126.5 crore in FY 08, yielding an EPS of 32.4 with the current market price discounting earnings by only 13 times for a company doubling its profits every year. The management has indicated confidence in sustaining 100% growth for the next 3 years, which their track record so far bears out.

Smart investors have already taken stakes in the company. Government of Singapore already holds 5 % in it. Goldman Sachs is an investor and so is Reliance Energy through its subsidiary and Tata group also has a stake. Long term investors with a time horizon of 3 years should consider investing into this stock with expectations of a 5 fold return during the period.


Shiv Kumar said...

Any idea as to the number of debtor days regarding ICSA? Also what is the amount of outstandings from SEBs and how prompt is the company in collecting receivables?

Mahendra Naik said...

Hi Shiv Kumar,

Unfortunately the annual report of 06-07 does not provide any of these details. Talk about transperancy. All it has is the outstanding debtors at about 173 cr. Out of these outstanding for > 6 months is 28 cr and the rest is < 6 months. This on a sales turnover of 332 cr. I'll try to e-mail them for these details and see if they reply.

Anonymous said...

Hi Mahendra,

I was also wondering about the same issue. The outstanding debtor of the company is almost 50% of the sales amount. Do you know what steps the company is taking to recover its dues from the cash strapped SEBs?



Mahendra Naik said...

Hi Ajay,

As of now I have not received any new information regarding outstanding debtors. I'll update this post as soon I get something new on this.



Uma said...

Finally got a chance to catch up with your many informative writeups. I recently picked up Deepakfert at 52 bucks, what a steal! Tho now I'm never touching Tata Steel I have a strange allergy to it! More like a phobia. Why are these stocks, which never went up like Reliance, crashing like this?

Mahendra Naik said...

Hi Uma,
Congrats on Deepak Fert purchase @ 52. It has appreciated well since. Tata Steel looks weak on the turning of the commodity cycle and with it steel. You would indeed do well to stay away from it.


Anonymous said...


ICSA has fallen big time. Would like to ask you WHY?? What went wrong??
Any lessons that you would like to share on this??

And 2ndly, do you consider it a buy at current price?


India has many young promising companies like the one in the post.

Anonymous said...

sir whats your view on ICSA India at current market it a buy ??

Shiv Kumar said...

exited the stock with a 97 per cent loss. thankfully, size of the initial position was low.

lesson learnt: avoid companies with huge debt regardless the size of opportunity. should there be a downturn, companies with huge debt can go under without any chance of recovery.