FINOCO

Primary business of Corrtech International Ltd

In India, we are one of the most prominent providers of pipeline laying solutions, including hydrocarbon pipeline laying activities. Our Company has evolved as a major leader in horizontal directional drilling (“HDD”) and cathodic protection systems (“CPS”) in addition to pipeline laying and construction over the years . We manufacture precision components and supply products and services to gas turbine and steam turbine operators, as well as services to the aerospace and defence sectors, through our subsidiary, Corrtech Energy Limited (“CEL”) ). CEL also provides EPC (Engineering Procurement and Consruction) solutions for material and feed handling facilities in oil and gas refineries and petrochemical complexes.

Summary of Industry

Industrial output growth remained constant in October’21 at 3.2 percent, compared to 3.1 percent the previous month. Negative growth in the capital and consumer goods sectors has slowed total industrial output growth. During the month, the sequential momentum in industrial activity increased by 4.3 percent. Except for energy, capital goods, and consumer goods, output increased in all sectors over the previous month.

SWOT analysis of Corrtech International Ltd

Strength

• Long term relationship with clients and pre-qualification experience helps us in securing projects

Company has long-standing relations with leading players in the Indian oil and gas sector and started working with GAIL (India) Limited in the year 2000, with Indian Oil Corporation Limited in the year 1999, with Oil and Natural Gas Corporation Limited in the year 1993, with Hindustan Petroleum Corporation Limited in the year 1997 and with Bharat Petroleum Corporation Limited in the year 2008.

For our O&G Services Business in particular, pre-qualification is crucial when choosing vendors.
Track record, financial situation, equipment ownership, the condition of completed projects, and other factors are some of the important pre-qualification requirements.

For manufacturing operations, company have established a solid market position for the provision of parts and services for GE gas turbines in the aftermarket. Company have also supplied parts to Indian firms active in the aerospace and defence sectors. And have been providing parts and services to Ethos Energy GmbH and ET International for more than five years, and also supply some parts to one of India’s top aerospace and defence firms.

• Established track record of completed projects and geographical footprint

Corrtech International ltd have completed more than 50 Hydrocarbon pipeline laying projects spanning over 3,500 kms in more than 13 states across a variety of topographies and weather conditions.

• Large order book

Corrtech International LTD has Order Book of over ₹24,400 million, which is 2.63 times the revenue from its O&G Services Business for Fiscal 2021.

• Diverse fleet of equipment

Operate and maintain a large fleet of equipment which helps us meet diverse customer requirements. Corrtech have 300 equipments including 19 Crane, 91 DG Set, 55 Excavator etc. for their O&G business. For their manufacturing business they have 50 equipments including 31 CNC machine, 8 Grinding machine and others.

Note:- April 1, 2018 to September 30, 2021, they have used ₹366.82 million for purchase of property, plant and equipment. Further, we intend to utilize a part of Net Proceeds from the Offering for expanding our equipment base.

• Experienced promoters and management with efficient project execution team

Promoters with over 24 years of operational knowledge in the O&G service industry and skilled professionals who have experience in the pipeline construction and manufacturing sector.

Weakness

• Attrition rate

The Attrition Rate for our Company’s permanent employees as on December 31, 2021 and for the Fiscal 2021,
Fiscal 2020 and Fiscal 2019 was 24.61%, 16.26%, 15.82% and 13.72%, respectively.

• Company derive majority of our revenue from our oil and gas services (“O&G Services”) business and financial condition would be materially and adversely affected if it fails to obtain new contracts.

• Company derive majority of its revenue from limited no of customers.

Top five customers contributed to 73.23%, 80.53%, 71.16% and 75.42%, of revenue from operations for the six
months period ended September 30, 2021, Fiscal 2021, Fiscal 2020 and Fiscal 2019 respectively.

• Uncertainity in conversion of order book

Order Book may not necessarily translate into future income in its entirety or could be delayed. Some
of our current orders may be modified, cancelled, delayed or not fully paid for by our clients, which could
adversely affect our business reputation, which could have a material adverse effect on our business,
financial condition, results of operations and future prospects.

As of December 31, 2021, Company had an Order Book of over ₹24,400 million comprising of 56 projects.

• Capital Intensive and highly competitive business sector.

Company operate in a highly competitive market. If it is unable to bid for and win projects, or compete with
larger competitors, they could fail to increase, or maintain, volume of order intake and results of
operations may be materially adversely affected.

Opportunities

• Utilising economies of scale to expand into adjacent industries and segments could prove to be lucrative in the near future.
• Fostering relationships with current clients could lead to upselling the company’s services, increasing the average order value.
• Capturing markets in newer geographies can be profitable and provide a hedge to the company’s domestic operations.

Threats

• At present, Oil &Gas segment contributes to a major chunk of the company’s revenues. Any disruption in this segment could adversely affect the company’s profitability.
• This is a sector that faces its share of government regulation. A change in certain government policies could disturb its operations.

Corrtech International Limited’s Financial Informations:-

Profit and loss

Balance sheet

Cash Flow Statement

Key Points to to be considered before subscribing for Corrtech International IPO.

• Company intend to utilise a part of the Net Proceeds amounting to ₹40 crore to make an investment in its Material Subsidiary, Corrtech Energy Limited. Corrtech Energy Limited will further utilise this fund for to fund its long-term working capital requirements over Fiscal 2023 and Fiscal 2024. The Main source of revenue through its subsidy if from manufacturing of gas turbine spare parts and on field servicing and repairing of gas turbine along with installation, laying and commissioning of gas and oil pipelines and cathodic protection systems. So basically the subsidy company is also engaged in O&G business so its can be horizontal- vertical integrations.
• Lets look at the accounting ration of the company and compare it its listed peers.

• Comparison of accounting ratios with listed industry peers:-

Terms used in Table:-

*Source for our Company: Based on the Restated Financial Statements for the year ended March 31, 2021.
Basic and diluted EPS are computed in accordance with Ind AS 33 – Earnings per share.

1. Basic EPS (₹) = Net profit/ (loss) after tax, as restated attributable to equity shareholders divided by weighted
   average number of Equity Shares outstanding during the year as adjusted for bonus issue of Equity Shares
   dated March 9, 2022 for the Company.
2. Diluted EPS (₹) = Net profit/ (loss) after tax, as restated attributable to equity shareholders divided by
   weighted average number of diluted Equity Shares outstanding during the year as adjusted for bonus issue
   of Equity Shares dated March 9, 2022 for the Company.
3. RoNW is calculated as Net profit after tax and minority interest divided by closing net worth. Net Worth has
   been computed as aggregate of share capital and reserves and surplus but doesn’t include reserves created
   out of revaluation of assets, debenture redemption reserve, capital reserve i.e., gain on bargain purchase,
   write-back of depreciation, notional reserves created on account of Ind AS impact and amalgamation. In
   case, the net worth is negative for a particular year, the same has not been considered.
4. P/E Ratio has been computed based on the closing market price of equity shares on the NSE on 28th February
   2022, divided by the Diluted EPS on www.nseindia.com.
5. NAV is computed as the closing net worth (sum of equity share capital, other equity and non-controlling
   interest) divided by the closing outstanding number of equity shares as on March 31, 2021 (calculated post issue bonus shares)

Sources :- DHRP report and company official website :- www.corrtech.in