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Sunday, June 21, 2009

Force Motors Ltd - Small Cap Today ... Large Cap Tomorrow?

Force Motors Limited, A Firodia Enterprise, is a Company that has reinvented itself. Four decades ago, Force Motors started production of the HANSEAT 3-Wheelers in collaboration with Vidal & Sohn Tempo Werke Germany and went on to establish a strong presence in the “Light Commercial Vehicles” (LCV) field with the MATADOR. The proverbial LCV in India.


Through the 80s and 90s, especially in the last 5 years with a major product development effort, Force Motors has introduced new Light Commercial Vehicles, a new family of Utility Vehicles, new state-of-the-art Tractors, and a new range of Three-Wheelers.

Today Force Motors stands on the threshold of a new era in the automobile industry in India, with a stake in Five Product segments :


TRACTORS - OX and Balwan - Modern Tractors , sporting synchromesh transmission , Bosch hydraulics, excellent ergonomics and fuel efficient engines. Designed for demanding farmers of developing countries.

THREE WHEELERS - Minidor . A family of new and beautifully engineered three- wheelers - economical, rugged and environment friendly - very efficient transport for people and goods.

LIGHT COMMERCIAL VEHICLES - Traveller and Excel range of passenger & goods carriers. Powered by a family of DI and IDI engines including the legendary Mercedes derived OM 616 engines. A range of high reliability axles and transmissions add value.

MULTI UTILITY VEHICLES - Complete range of multi utility vehicles including the Trax Judo, Trax GAMA, Trax Cruiser, Trax Kargo King, range of single cabin and double cabin pickups. And the 4X4 cross country vehicle - Trax Gurkha.

HEAVY COMMERCIAL VEHICLES - In technical collaboration with MAN AG, Germany, Force Motors will be introducing shortly a range of heavy commercial vehicles with a payload capacity ranging from 16 to 50 tonnes.

FORCE Motors' recent announcement to convert its joint venture (JV) with MAN Nutzfahrzeuge AG of Germany into an equal JV is a welcome break for the beleaguered shareholders of Force Motors. In the past five years, the company has failed to grow its topline despite a boom in the commercial vehicle segment.

Moreover, it has been posting losses since FY07. The earlier 70:30 JV with MAN-Man Force Trucks (MNF) is yet to show any significant activity, despite being three years old now. Its decision to allow MAN to raise its stake in MNF to 50% is likely to give a fresh lease of life to the JV, besides providing its parent company, Force Motors, with the much-needed cash.

Under the deal, Force Motors will sell 14.2% stake in MNF to MAN for a consideration of Rs 300 crore. MAN will acquire additional equity through a rights issue worth Rs 250 crore to raise its stake to 50%. The deal values MNF at over Rs 2,000 crore. In contrast, Force Motors' current market capitalisation is a little over Rs 140 crore. The move shows MAN's commitment to the JV and the importance it attaches to its success in the domestic market.

India is among the world's top four markets for commercial vehicles and MAN is seeking a significant pie of this growing cake. The Germany-based automotive and engineering major is one of Europe's leading truck makers. An equal stake will allow MAN to play a leading role in the company's management and may turn out to be a turning point for the fortunes of Force Motors' investors.

Market Cap 131.10
EPS (TTM) 104.83
P/E 0.95
P/C 0.74
Book Value 78.14
Price/Book 1.27
Div(%) 0.00
Div Yield(%) -
Market Lot 1.00
Face Value 10.00
Industry P/E 18.57

One must consider buying stocks of Force if he/she is long term investor in market and believes in concept of Turnaround story. This small cap could become mid cap and who knows a large cap tomorrow, though only in long term.

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