ACB (INDIA)

Promoted by G.C. Mrig, Capt. Rudra Sindhu and Major Satya Sindhu; Washes coal to reduce its ash content helping power plants to become more efficient and eco-friendly.
Secret Sauce Seasoned team, favourable regulation and sustained
demand for coal.
Financial Dashboard In 2006, Warburg Pincus bought a 24 percent stake for Rs. 310 crore. Aryan plans an IPO this year to raise Rs. 1,000 crore. Warburg will sell 10 percent. Aryan Coal's valuation now stands nearly seven times its 2006 level.
What the Smart Set Saw First mover advantage.
Guiding Light To go beyond coal-washing and expand power generation capacity.

In 1998, when Mrig and his two friends founded Aryan Coal Benefications Ltd, the annual production of coal in India stood at about 250 million tonnes. Indian coal typically has high ash content that keeps combustibility low and affects the efficiency of power generation equipment. Only 5 percent of the coal production in the country was "washed" to reduce the ash content and most saw no need for this extra expense.

So it was not surprising when Mrig, who had spent 40 years in the industry including as managing director of Bharat Coking Coal Ltd., found it tough to get orders for his new company. His friends even wrote him off, saying, "Aapne toh paisa duba diya," (you have wasted your money).

That was then. Now annual mining has increased to about 450 million tonnes. The government has made it compulsory for power stations located 1,000 kilometres or more from mines to wash the coal. Given that four out of 10 power stations in India are located in such faraway locations, the scope for the coal-washing business has expanded.

ACB has 62 million tonnes of coal-washing capacity, nearly half of the 130 million tonnes capacity in the whole of the country.

Private equity watchers now think that Aryan might do for Warburg Pincus this year what Bharti did for it nine years ago. And both investments were made by Pulak Prasad, who has since started his own hedge fund Nalanda Capital. Just the way Prasad spotted Sunil Mittal's execution he was able to see Mrig's understanding of this industry and execution skills.

Most of ACB's washeries are located very close to the coal fields and the transportation costs are low. The company has massive operating profit margins of 44 percent that the company makes. Crisil expects ACB to benefit from the increase in demand for washed coal and stringent prequalification requirements that restrict new players. So, its market share is not under threat in the foreseeable future.

ACB doesn't waste the coal reject that remains after the washing either. It uses the material to runs some small power plants. With 4 million tonnes of coal reject coming free every year, this has become a very profitable way for ACB to dispose the waste.

Mrig says he got the idea to recycle the waste when he saw gold miners in South Africa going after dumped mines and the Chinese extracting most out of low-quality coal.

But now it wants to enter the big league. It plans to build a 1,200 MW power plant in Madhya Pradesh and a 1,100 MW plant in Chhattisgarh.