Rs

Rs. 132 <= o:p>

M & P Pumps

Pumped up

M & P Pumps (MPPL) was originally established in Manchester, U.K. in 1845= for designing

and supplying multi-stage centrifugal pumps. Over the years, it established manufacturing=

plants across the glo= be in South Africa, Ireland and India. The Pune operations commenced

in 1959. In 1985,= Mather & Platt split and sold off worldwide.=

In 1987, Mather & Platt India became a member = of the Jumbo Group, Dubai. Mather & Platt

Pumps came into existence with the de-merger of the fluid engineering division fr= om

Mather & Platt India. The company was part of the Jumbo G= roup owned by the Chhabria

family.

In Mid 2005, Germany-based Wilo AG acquired the In= dian promoter’s 62% stake in the

company. Consequently,= Wilo made an open offer to acquire 1.85 million share= s from the

public at Rs 109.32 per share. Wilo currently holds 62.84% stake in the company.

MPPL is engaged in the business of design, development, manufacture, installation and

servicing of centrifugal pumps/valves and contracts of pumping systems on turnkey basis.<= /span>

The company caters to diverse industries namely, Power plants (for circulation, boiler feed,

de-scaling, condensate extraction, cooling towers), Municipal water supply and distribution,<= /o:p>

Sewage and effluent transport, Petrochemical & Fertiliser, Pumps for fire figh= ting sector

covering major industri= es, ports, power plants, building services etc., Steel, Mining, Water

Supply, Irrigation, Municipal Servic= es and Pulp and Paper Industry. M&P products have

inherently better Hydraul= ic Design resulting in higher efficiency and lower power

consumption.

Consequently, business prospects are linked to investment in urban infrastructure, power<= o:p>

generation and capex in industrial end users.

Strong German parent

Wilo is one of the leading international suppliers of pumps and pumping systems. It is

ranked among the top = 10 pump manufacturers of the world. The Wilo group= ’s business

segments are Heating, refrigeration and air-conditioning, Water supply and sewage lifting.

Wilo has been exten= ding business activities in water supply & sewage and industrial<= /span>

pumps and is seeking= to increase presence in the Asian market which is growing the

fastest. Towards this = end it has earlier made the acquisition of EMU in Germany for entering

the municipal sewa= ge and now MPPL to enter in the domain of industrial pumps. Each of=

its manufacturing facility specialises in a specific line of pumps. Wilo= has also acquired

another Mather & Platt group company, Mather & Platt Fire Systems.

Sensex: 14994 Nifty: 4574

Wilo expects its ma= in growth impulse from Asian, Eastern & South Eastern European<= /span>

markets. Furthermore, = the pump group strives to gain noticeably more market shares in

climate control, water supply and waste-water management. These segments are showing

marked growth worldwi= de.

Wilo’s reputation has helped MPPL in getting orders faster.

Wilo has given the company a new lease of life

Established in 1870, MPPL is historically well-known for high split case pumps. Its strong

technological capability has earned it strong goodwill. However the company suffered due

to its financial problems. Ever since the Chhabria group took ov= er the company from 1988,

the financial condition kept on deteriorating.

Though orders were good, the supply of raw material, spares etc never met the requirement,

nor anything was d= one from management side to make the system productive and rational.=

MPPL had to pay high price for raw materials, which affected the margins. There = were

continuous problems on pa= rt of working capital and productivity. The company had to
take high interest loans from co-operative banks.

Since the management hardly took any interest on the core business of the company, this

lead to huge debtors pile up and also more bad debts. For FY 2005, the company wrote off

Rs 12 crore as bad debts and further R= s 2.69 crore during nine months ended Dec’0= 5.

This fell to 68 lakh in FY 2006 and nil in FY 2007. = Thus the company has mostly cleaned up

the balance sheet.=

MPPL specializes in the fast growing water supply segment

MPPL is specialized in High split case pumps (one typ= e of centrifugal pumps). Such pumps

are used for water supply related activities. Thus the usage may vary from pumps of 2 hp<= /o:p>

used in residential locality for supply of water and to 1000hp in power plants. The demand=

for such pumps come from existing and new commercial and residential buildings, power

plants, steel plants, cement plants and all such industries where water requirement becomes<= /o:p>

an integral part = of the project. The new power projects, steel and c= ement projects that are

coming up will assure strong growth of such large pumps in future. Thus, the strong

investment climate in industry and infrastructure sectors continues to lend support for

sustainability of a strong gr= owth in the industrial and infrastructure pumping solutions

business. MMPL is well placed to capitalize on the pump business boom.

The customers include, in refineries (BPCL, Reliance Ind, HPCL), in Power (NTPC, PGCL,

Reliance Energy), in steel (Tata Steel, Bhusan steel, Jindal Steel), in irrigation and water

supply (BMC, Maharashtra Jivan Pradhiyan (MJP), Maharashtra Krishna Valley Irrigation

(MKVI) etc).

MPPL has several growth strategies in place

Focus on growing product segments: Wilo will be making its line of water supply, drainag= e/

sewage and HVAC pumps= at MPPL. The former has strong potential with 15-20% growth<= /p>
in the domestic a= nd East European markets and in any case is the largest market globally.<= /o:p>

The HVAC segment is a growing segment across Asia whose growth is dependent on<= o:p>

construction activity and building construction norms. (e.g. Elimination of overhead tanks

has resulted in booster pump installations in high-rises to deliver water).

The company has expansion plans on three fronts: Facilities, Products and Resea= rch &

development. Test Bed at <= span class=3DSpellE>Chinchwad Works is being modernized to handle higher capacities

and larger number = of pumps. The production facility will have additional CNC machines to

meet increasing demands. The company has commenced manufacturing the WILO range<= /span>

of pumps at its <= span class=3DSpellE>Kolhapur unit built with the world class state of art technology leading to

global quality produc= ts. The company anticipates great prospects for these products.

Utiliza= tion of Wilo’s distribution network= : Wilo’s comprehensive distribution network<= /o:p>

will be used to mar= ket MPPL’s existing products in energy, chemical in= dustry and irrigation.

Wilo has 44 marketi= ng outlets across the globe and a very strong presence in the east-=

European markets.

Entry into growing markets: The fastest growing pump markets are in Asia and Eastern

Europe where a lot of activity is occurring in waste-water and municipal water sup= ply and

construction. MPPL will have access to both through Wilo’s comprehensi= ve presence in

Europe and its Korean and Chinese operations.

MPPL and Wilo have lots of untapped synergies

The new parent plans to utilize MPPL’s manufacturing capacities for producing and selling

centrifugal pumps for whic= h Wilo currently has no product (energy, chemical indus= try and

irrigation) in its worldw= ide Wilo sales organizations. MPPL has sufficient product= ion facilities

at its Pune plant.

Furthermore, MPPL is also planning to venture into manufacturing small and horizontal

pumps using the technology of WILO group. Initially such pumps will be imported and

assembled in the factory= and later on the entire manufacturing base will be set up in the

factory.

Thus, both the companies will conglomerate the products as, = Wilo will be able to utilize the

technology advantage of M= PPL and selling the products made by MPPL outside India

through its 44 subsidiaries worldwide, while MPP will be able to cater to the small and

horizontal pump market in India by selling Wilo’s products. Also go= ing forward, Wilo plans

to establish MPPL= as a manufacturing hub for its products considering the labour and<= /span>

manufacturing cost advantage= in India. All these synergies will reflect in the company’s

financials in the long-te= rm.

Financials are pumping up=

For the fourth quarter ended December 2007, MPPL registered sales growth of 60%= to Rs

67.09 crore. OPM improved = by 440 basis points from 11.7% to 16.1%. This took OP up by

119% to Rs 10.77 crore.

PBT grew 84% to Rs 8.14 crore<= /span> and PAT was up 94% to Rs 5.21 crore.

For the year ended December 2007, its sales grew 38% to Rs= 181.88 crore and PAT was up
8% to Rs= 10.1 crore.

The company has been able to deliver impressive results due to the initiatives taken by the

management in controlling costs, optimization of product mix and better working capital

management and its endeavor in exploring export opportunities in Europe, Africa and

Middle East and South-East Asia.

Valuations

With rising capital expenditure in putting up large scale steel plants, cement plants, refineries,

power plants in the country and the thrust of the government on irrigation projects, ensuring

water supplies to villages and expansion of sewage handling & treatment facilities for

growing urban areas, t= he demand for water & sewage pumps is expected to grow
impressively in the years ahead.

In FY 2008 (ending December), we expect the company to register sales of Rs 233.53 crore

and PAT of Rs 13.67 crore. On equity= of Rs 9.23 crore and face va= lue of Rs 10 per share,

EPS works out t= o Rs 14.8. The share price trades at Rs 132. P/E works out to just 9.0.

FINANCIALS=

NET OPM OP OI. PBIDT INT. PBDT DEP. PBT EO PBT TAX PAT PRIOR PAT EPS=

SALES (%) BEFORE EO AFTER EO PERIOD ITEMS AFTER ADJUST

0812 (12P) 233.= 53 13.0 30.45 0.84 31.29 7.50 23.79 2.09 21.7 0.00 21.70 8.03 13.67 0.00 13.67 14.8

0712 (12) 181.88 11.2 20.43 1.29 21.72 5.12 16.60 1.61 14.99 0.00 14.99 5.69 9.30 0.00 9.30 = 10.1

0612 (12) 131.37 13.2 17.35 1.08 18.43 2.65 15.78 1.24 14.54 0.68 13.86 5.28 8.58 0.00 8.58 = 9.3

0512 (9) 67.12 = 10.0 6.68 0.29 6.97 2.24 4.73 0.96 3.77 2.69 1.08 0.61 0.47 0.00 0.47 #

0503(12) 89.46 = 20.7 18.55 1.97 20.52 3.58 16.94 1.16 15.78 12.00 3.78 3.13 0.65 0.00 0.65 11.1<= o:p>

* On current eq= uity of Rs 9.23 crore: F= ace Value of Rs 10 per share. # EPS cannot be annua= lised due to seasonality of business. EO: Extraordinary items. EPS is calculated on PBT before = EO

and relevant tax. = Figures in Rs crore. (P): Projections. =

&nb= sp;

M &= P PUMPS: RESULTS

   0712 (3)         0612 (3)       &nb= sp;    VAR. (%)       &nb= sp; 0712 (12)       &n= bsp; 0612 (12)       &n= bsp; VAR. (%)

Net sales         &= nbsp;      67.09       41.99=         &= nbsp;            60        &= nbsp;           &nbs= p;      181.88        &= nbsp;           13= 1.37        &= nbsp;           38

OPM(%)         &= nbsp;           &nbs= p;           16.1         = 11.7         =         &= nbsp;               &= nbsp;               &= nbsp;       11.2         =         &= nbsp;       13.2

OP          =         &= nbsp;       10.77       4.91=         &= nbsp;           &nbs= p; 119        &= nbsp;           &nbs= p;    20.43       &= nbsp;           &nbs= p; 17.35        &= nbsp;           &nbs= p; 18

Other inc.   =            -0.18      = 0.46                &= nbsp;       PL        &= nbsp;         &= nbsp;       1.29         =         &= nbsp;       1.08         =         &= nbsp;       19

PBIDT                 =     10.59       5.37 =         &= nbsp;           &nbs= p; 97        &= nbsp;           &nbs= p;      21.72        &= nbsp;           &nbs= p; 18.43        &= nbsp;           &nbs= p; 18

Interest         &= nbsp;         2.00         = 0.62         =         &= nbsp;       223        &= nbsp;         &= nbsp;       5.12         =         &= nbsp;       2.65         =         &= nbsp;       93

PBDT              &= nbsp;       8.59        <= /span>4.75        &= nbsp;           &nbs= p;   81        &= nbsp;           &nbs= p;      16.60        &= nbsp;           &nbs= p; 15.78        &= nbsp;           &nbs= p; 5

Dep.                &= nbsp;       0.45        <= /span>0.32         =         &= nbsp;       41        &= nbsp;           &= nbsp;       1.61         =         &= nbsp;       1.24         =         &= nbsp;       30

PBT before EO      8.14        4.43 =                 &= nbsp;       84        &= nbsp;           &= nbsp;       14.99               &= nbsp;       14.54               &= nbsp;       3

EO        &= nbsp;         &= nbsp;       0.00        <= /span>0.00        &= nbsp;           &nbs= p;   —        &= nbsp;           &nbs= p;       0.00       &n= bsp;            = ;   0.68        &= nbsp;           &nbs= p;   -100

PBT after EO          = 8.14         = 4.43        &= nbsp;           &nbs= p;   84        &= nbsp;           &nbs= p;      14.99        &= nbsp;           &nbs= p; 13.86        &= nbsp;           &nbs= p; 8

Tax         &= nbsp;           &nbs= p;   2.93         = 1.75         =         &= nbsp;       67        &= nbsp;           &= nbsp;       5.69         =         &= nbsp;       5.28         =         &= nbsp;       8

PAT                 &= nbsp;       5.21         = 2.68        &= nbsp;           &nbs= p;   94        &= nbsp;           &nbs= p;      9.30        &= nbsp;           &nbs= p;   8.58        &= nbsp;           &nbs= p;   8

EPS        &= nbsp;           &nbs= p;   #       =       #        &= nbsp;             &= nbsp;           &nbs= p;                  &= nbsp;       10.1         =         &= nbsp;       9.3

* On current eq= uity of Rs 9.23 crore: F= ace Value of Rs 10 per share.

EO: Extraordina= ry items.

# EPS cannot be annualised due to seasonality of business.

EPS is calculat= ed on PBT before EO and relevant tax.

Figures in Rs crore.

STOCK DATA

SECTOR : Pumps

BSE Code : 532469

NSE Code : -

Bloomberg : MPP IN

Reuters : MAPP.BO

52-week High/Low : Rs 2= 80 / 123

SHAREHOLDING PATTERN*

Total Foreign 7.32

Total Institutions 0.03

Total Govt Holding 0

Total Non Promoter

Corporate Holding 6.18

Total Promoters 62.84

Total Public & Others 23.64

Totals 100

* as on 31st December 2007

Wilo expects its main growth

impulse from Asian, Eastern

& South Eastern European

markets. Furthermore, the

pump group strives to gain

noticeably more market

shares in climate control,

water supply and wastewater

management. Thes= e

segments are sho= wing

marked growth <= span class=3DSpellE>worldwide

The new parent plans to

utilize MPPL’s manufacturing

capacities for producing and

selling centrifugal pumps for

which Wilo currently has no=

product (energy, chemical

industry and irrigation) in its

worldwide Wilo sales=

organizations. MPPL has

sufficient production faci= lities

at= its Pune= plant

The company has been able

to deliver impressive results

due to the initiatives taken by

the management in

controlling costs,

optimization of product mix

and better working capital

management and its

endeavor in exploring export

opportunities in Europe,

Africa and Middle East and

South-East Asia<= /span>

Strong investment climate in

industry and infrastructure

sectors will help this 63%

subsidiary of a German

company grow on<= o:p>

sustainable basis

PREPARED BY : A= vtar Kataria