So we all know EWSI and Cerebra are working togeth

So we all know EWSI and Cerebra are working together to put up India's largest, most modern, e-waste facility. I came across some notes from Cerebra that contain a lot of numbers expected from this facility. All the information is listed below. From what I understand, when facility is fully operational, they are going to run 3 shifts. Each shift can process 30,000 tonnes of e-waste annually. That is 90,000 tonnes annually! They say Attero has capacity of 36,000 tonnes annually and expect 1000 crores($161M) in 3 years. So it looks like they expect revenues around $150M annually with "25% margins conservatively". This is the 1st phase..they expect to double these capacities and revenues at a later time.

Note on Business Plans of Cerebra Integrated Technologies after the Company Visit and Management Meet.

The Legacy:

- Strong foothold in the IT industry since 1992.

- One of the first companies in India to manufacture PCs for Pentium, manufacture and brand their own Laptops, PDA and motherboards in India.

- Major clients included The Indian defense, many large Indian banks, corporate, Lucent Technologies etc.

- Caught into the web of BIFR in 2003 due to some heavy bad debts in Europe in 2001 -02; but the partners, vendor contacts and the brand name still active and vibrant.

Ewaste Management

- In India, 800,000 tonnes of ewaste is generated every year with Bangalore along generating 1,20,000 tonnes annually. Government pocily on ewaste is a gazette already and will be implemented any moment.

- Cerebra plans to setup the largest plant for E-waste processing in India in order to capture this opportunity.

- [b]10 acres land awarded by the Karnataka government to Cerebra to set up the plant near Bangalore. 25% payment already made. This would house 30000 tonnes of the planned capacity (per shift), additional 30000 tonnes expansion is planned in the second phase.[/b]

- [b]The plant is expected to run three shifts within two quarters of the machinery setup; which would then make this company the largest e-waste processor in India.[/b]

- Tied up with Cimelia, subsidiary of Enviro-Hub Holdings which is listed in Singapore, for the technology to process E waste following international standards.

- 30 % Equity commitment from the technology partners with a 3 year lock in clause in their agreement.

- By bringing Cimelia, Scenic Singapore and Leytron Pte as co-promoters, the promoter holding stand around 40 percent now.

- [b]Machinery for E waste management expected to be installed in next 2 quarters.[/b]

- Tied up for collection centers for E waste collection with their relationships.

- Cerebra already has relationships with hardware suppliers, vendors and companies like Infosys, Wipro etc which can act as major e-waste source. (This is currently a major concern for Cimelia in Singapore since Ewaste is not available freely there and has to be imported).

- [b]Major margin expansion expected in the business going forward as the margins in Ewaste are around 25% conservatively.[/b]

- Revenue to start immediately even before the plant is ready as Cerebra plans to act as an aggregator in the meanwhile and export the E-waste to Singapore facility of Cimelia for processing.

- Also, Mobile shredders have been imported already to recycle the e-waste at the clients location in order to meet their STPI requirements.

- [b]Further, company has the capabilities to setup and execute various high margin revenue streams such as Refurbishment, Asset Recovery services apart from the usual Metal recovery processes – which inturn can generate higher yield per ton of e-waste.[/b]

Competitor Analysis:

In terms of competition in E-waste recycling, Attero seems to be the only meaningful one in India

doing something in this space. But it has no background in the hardware and software space and the right technology partner. It has managed to get funding from IndoUS venture partner, Draper Fisher foundation and a series B funding by a Mauritius based fund. [b]It has a capacity to recycle 36,000 tonnes per year and it plans to do 1000 crores turnover in next 3 years.[/b]

Conclusion:

Thus, overall, Cerebra is bouncing back from all its earlier issues (It’s a debt free company now) and all its efforts for the past 2 years have paid off after having Cimelia as their Co-promoters in setting up India’s largest E-waste processing outfit. We feel this is the right synergy looking at the strengths and the existing network that Cerebra can leverage in India and domain expertise of Cimelia.

The Turnover is expected to be around 500 Crores by 2012-13 with a margin of around 25% without the plastic to fuel technology being implemented at all. Cimelia also plans to increase its stake going further and this will trigger an open offer too going further. Also, it is also a clear case to demerge the LPO business and the Ewaste Business from the existing Hardware business going forward. The management also seconds this view and demerger is definitely on the cards as a lot of institutions are already looking at these vertically on a standalone basis as to how it pans out.

With expected  Turnover of 500  crores with a 25% margin, we expect the EPS to be around 25 in 2013 and growing at 30 % every year (not factoring the pastic to fuel technology). Hence, at the current price of 28, we expect this to be a 6-7X bagger in next 24-30 months.

(Business India has also published the complete turnaround story of Cerebra in their current November edition.)

{This is a .doc that will be downloaded. GOOGLE "CereBra.doc" and it should be the first link.}