Professional Documents
Culture Documents
September 20
2012
Chemical, Fertilizer, Sugar & Agriculture
Agriculture Sector 1. 2. 3. 4. 5. Introduction ........................................................................................................................................ 18 Government Policies ........................................................................................................................... 20 Issues and Challenges ......................................................................................................................... 21 Recent Government Initiatives ........................................................................................................... 22 Some important players...................................................................................................................... 23
Chemicals Sector 1. 2. 3. 4. 5. 6. 7. Introduction ........................................................................................................................................ 28 Global and Indian Scenario ................................................................................................................. 28 Market constituents ............................................................................................................................ 30 Majorly Produced Chemicals in India ................................................................................................. 34 Issues faced by Indian Chemical Industry ........................................................................................... 42 Government Policies and Initiatives ................................................................................................... 42 Some Important Players in Chemicals ................................................................................................ 45
Fertilizers 1. 2. 3. 4. 5. 6. 7. Introduction ........................................................................................................................................ 52 Nitrogenous Fertilizers ........................................................................................................................ 53 Phosphatic Fertilizers .......................................................................................................................... 54 Potassic Fertilizers ............................................................................................................................... 55 Complex Fertilizers .............................................................................................................................. 56 Agrochemicals ..................................................................................................................................... 57 Factors effecting Fertilizer Prices: ....................................................................................................... 62 Page 1
SUGAR SECTOR
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Source: Netscribes
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Source: Netscribes
4. Government regulations
Through Sugar Industry in Brazil was deregulated in 1990 as IAA, the government intervention agency ceased control, in India it is still influenced by the government both at state and central level. Dual sugarcane pricing in terms of FRP and SAP No other agriculture or food product is subjected to levy obligation Regulated monthly release mechanism Restriction on corporates for sugar farming Restriction on import and export of sugar through Import and Export duties Cane area reservation Minimum distance criteria of 15 kms is maintained among sugar factories
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SRSL is a transnational agribusiness and bioenergy corporation. The company is currently 5th largest sugar producer in the world, India's largest sugar refiner and ethanol producer based in Mumbai, Maharashtra. It is the only sugar company of India to have significant operations in the two most relevant locations in the world: the largest sugar exporter, Brazil, and the largest sugar consumer, India. Besides, its integrated, diversified and flexible business model makes it relatively more resilient to cyclical downsides. SRS is the only sugar/ethanol producer in the world with almost year-long cane crushing operations as it has operations in Brazil and India, which have complimentary cane crushing seasons. This allows it to maximize/plan inventory, benefit from price arbitrage between sugar/ethanol, raw/white sugar and play price arbitrage between Indias regulated sugar industry and liquid global markets. It exports almost 20% of Indias international sugar trade. The Company directly markets sugar to institutional buyers instead of selling to wholesale agents and dealers. SRSL sells premium refined sugar and is a sugar supplier of choice amongst companies that produce carbonated soft drinks, fruit juices, chocolates, baby foods and dairy products including Pepsi, Coca Cola and many others. Being a Non-UP based sugar mill, it does not have to bear the politically motivated price burden being imposed in a cane farming dominant state. Company is also dealing with cane processing, refining sugar and generating carbon credits under Kyoto protocol. Owing to its Brazilian acquisitions SRSL now stands to benefit from the ongoing recovery in the global sugar industry. The Global prices have risen from low of 19 cents/lbs in June12 first week due to delay in the beginning of crushing season in Brazil. The Company expects better season in terms of cane crushing and capacity utilization for the Brazilian mills supported by improved weather conditions in Brazil and to reap benefits of better yields resulting from the cane plantation programs under taken during the last season wherein it has planted around 25000 Ha of land. SHRS has a gross debt of Rs 100 Billion. SHRS debt had increased from Rs8.5bn in SY08 to Rs65bn in SY10 on account of Brazilian acquisition. Companys debt is believed to come down in the subsequent quarters due to the release of working capital, reduction of inventory leading to higher margins in India and increased cash flows from Brazil.
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Stock Performance
Key Ratios
Shree Renuka vs Sensex ( Last 2 Years)
March' 12 Debt/Equity Core EBITDA Margin(%) EBIT Margin(%) Pre Tax Margin(%) PAT Margin (%) ROCE (%) ROE (%) Earnings Per Share (Rs) 2.43 10.72 7.33 1.96 1.22 10.52 4.73 1.25
EID Parry (India) Ltd is one of the largest business groups in the country. The company is engaged in the manufacture and marketing of a wide-range of products that includes Sugar, Bio-Pesticides and Neutraceuticals. Company had set up India's first sugar plant at Nellikuppam in 1842. It was India's first private sector company to perform Research & Development. The sugar division contributes to over 65% of EID Parrys turnover, and around 20% of the sugar production in Tamil Nadu is from EID. E.I.D-Parry pioneered sugarcane research and probably runs the only private R&D centre for sugarcane and tissue culture to develop new and improved cane varieties. It has also been aggressively promoting Eco-friendly pest management systems. Parry's varieties have comparatively higher average sucrose yield as compared to other benchmark varieties. The R&D division is focuses on developing sugarcane varieties having high yields, better sucrose content and greater pest resistance. E.I.D has been retailing its branded Sugar in South India. Apart from branded retail sugar, the company is moving up the value chain to products like pharma grade sugar which improve the margins. On a standalone basis, EID, has five sugar plants spread across South India, of which, four are in Tamil Nadu, one in Puducherry, with sugarcane crushing capacity of 19,000 TCD, cogeneration capacity of 84.5 MW and distillery capacity of 135 KLPD, cumulatively. EID has two sugar business related subsidiaries: A) Sadashiva Sugars: 76% shareholding, Cane crushing capacity of 2,500 TCD and cogeneration capacity of 15.5 MW B) Parrys Sugars Industries: 65% shareholding, Cane crushing capacity of 11,000 TCD, cogeneration capacity of 46 MW and distillery capacity of 95 KLPD Along with Cargill, EID has set up a JV, Silkroad Sugar, wherein it has 50% stake. Silkroad Sugar is a port-based refinery with refining capacity of 2,000 TPD and cogeneration capacity of 35 MW. EID also holds 65% stake in Coromandel International, which is the largest complex fertilizer maker.
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Stock Performance
Key Ratios
Eid Parry vs Sensex (Last 2 Years)
March' 12 Debt/Equity Core EBITDA Margin(%) EBIT Margin(%) Pre Tax Margin(%) PAT Margin (%) ROCE (%) ROE (%) Earnings Per Share (Rs) .73 6.25 12.7 8.62 8.7 10.29 11.69 7.91
Agriculture Sector
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1.1 Production
Normal monsoon in the year, 2010-11, had helped the country reach a significantly higher level of 244.78 million tonnes of food grains production post the severe drought conditions in 2009-2010. As per the second Advance estimates, production of food grains during 2011-12 is estimated at an all-time record level of 250.42 million tonnes which is a significant achievement mainly due to increase in the production of rice and wheat. Growth in the production of agricultural crops depends upon acreage and yield. Given the obvious limitations in expansion of agricultural land, long term growth primarily depends on improvement in yields.
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The country produced around 103 million tons of rice while consumption is expected to be around 95 million tons and Wheat production is estimated at 90 million tons and consumptions at 76 million tons for 2011-12. India is likely to export around 7.5 million tons of rice and 2 million tons of wheat for 2012-13. India's food grain production is expected to reach 270 million tonnes by 2016-17 with the increasing yields, leaving behind at least 10 million tons of exportable grains. Also, India can easily become self-sufficient in pulses production as the country produces around 17 million tons of pulses, while demand is 21 million tons. Around 3 million tons are imported to meet the demand. India faces serious problems in oilseed production. The country is one of the major importers of vegetable oil in the world. In India, area under oilseeds is around 100,000 hectare and area under oilseeds is expected to increase by 4 million hectares by 2016-17.
1.2 Exports
Indias trade policy on agricultural items is guided by the twin objectives of ensuring food security and building export markets for enhancing the income of farmers, depending on domestic availability. As per the International Trade Statistics 2011, published by the World Trade Organization (WTO), Indias agricultural exports amounted to US $ 23.2 billion with a 1.7 per cent share of world trade in agriculture in 2010. On the other hand, Indias agricultural imports amounted to US $ 17.5 billion with a 1.2 per cent share of world trade in agriculture in 2010. Latest Export Figures for Agriculture and allied products
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2. Government Policies
2.1 Price Policy Indian governments price policy for agricultural produce seeks to ensure remunerative prices to growers for their produce with a view to encouraging higher investment and production and safeguarding the interests of consumers by making available food supplies at reasonable prices. To achieve this end, the government announces minimum support prices (MSPs) for major agricultural commodities each season and organizes purchase operations through the Food Corporation of India, and cooperative and other agencies designated by state governments. The government decides on the MSPs for various agricultural commodities taking into account the recommendations of the Commission for Agricultural Costs and Prices (CACP), the views of state governments and central ministries as well as such other relevant factors which are considered important for fixation of MSP.
VAT
There are differences in the percentage rates and rules from State to State under VAT for oilseeds, oil meals, oilcake and oils. There is an element of 4% VAT on edible oils / oilseeds plus octroi and other local taxes on edible oils imposed by the state governments, which accounts to nearly 6 to 7%. The VAT on Olive oils is also charged at the rate of 4% by the Indian States.
FDI
100% Foreign Direct Investment (FDI) is allowed in Indian vegetable oils and vanaspati industry through the automatic route. Moreover in the Food processing sector and the private oil refineries sector 100% FDI is allowed through the automatic route.
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Rallis India is one of Indias leading agrochemicals companies. It has more than 150 years of experience in servicing rural markets and a comprehensive portfolio of pesticides, herbicides, fungicides and plant nutrients for Indian farmers. Areas of business : The domestic formulation business caters to the crop protection and yield enhancement needs of the Indian farmers through a wide portfolio of products, including insecticides, fungicides, herbicides, plant-growth nutrients and seeds. The domestic institutional business caters to the bulk and technical requirements of institutional customers. The international business handles exports of pesticides to all parts of the world. The export basket includes technical-grade pesticides, branded formulations and contract-manufactured products.
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Stock Performance
Key Ratios
Rallis India vs Sensex (Last 2 Years) Debt/Equity Core EBITDA Margin(%) EBIT Margin(%) Pre Tax Margin(%) PAT Margin (%) ROCE (%) ROE (%) Earnings Per Share (Rs)
March' 12 March' 11 .18 15.62 12.96 11.91 8.05 26.15 19.28 5.21 .18 16.1 16.51 15.99 10.99 36.94 27.26 64.9
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Ruchi Soya is the flagship company of Ruchi Group of Industries. It features among one of the top FMCG players of India. It is also ranked among top 200 consumer products companies of the world. Two of the strongest brands of the group are Nutrela & Ruchi Gold. Areas of business : Edible Oils such as Nutrela Soyumm (Soya bean Oil), Ruchi Gold (Palmolein Oil), Sunrich (Sunflower Oil) and Mandap (Mustard Oil) Vanaspati and Bakery fats Food products such as textured soy protein, flour, fruit juice, and soya milk} Exports agricultural commodities including raw cotton. Highest exporter of soya meal and lecithin from India. Company also offers gram, wheat, rice, maize, shorgum, seeds, coffee, marine products, tuar, peas, barley, soap, fresh fruit bunch, seedling Plant & machinery (equipment) Subsidiary called Ruchi Industries Pte. Ltd. Singapore started in 2010 unit which engages in businesses including plantations and processing, dealing in agricommodity, acquisitions/investments in plantation companies, etc.
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March' 12 Debt/Equity Core EBITDA Margin(%) EBIT Margin(%) Pre Tax Margin(%) PAT Margin (%) ROCE (%) ROE (%) Earnings Per Share (Rs) 2.23 2.75 3.08 .88 .47 12.62 5.64 3.67
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Chemical Sector
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Specialty Chemicals(18%) Paints and Varnishes Dyes and Intermediat eries Polymer Additives
Inorganic
Biotechnolo gy
Other
Chemical Industry can be segmented into three sub segments 1. Basic Chemical 2. Specialty Chemicals 3. Knowledge Chemicals
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This segment is characterized by high capital intensity and high entry barriers such as, stringent regulations on health, safety and environment because of the large volumes involved. R&D spends are limited and largely application oriented. Basic chemicals are used by other industries as raw material and converted to end-products. Hence their demand depends on the market dynamics of the end-use industries, which is often cyclical. Logistics play a key role in this industry since raw materials and finished products are voluminous and require special transport and material handling equipment. Manufacturing locations are therefore located either close to the raw material source or close to the consuming markets.
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3.2. Specialty Chemicals Specialty chemicals is generally described as a group of relatively high value, low volume chemicals known for their end use applications and catalyzing properties. In India, the industry is recording a rapid growth of approximate 15% y-o-y which includes fine chemicals, organic chemicals and pharmaceutical intermediates. The usage of specialty chemicals is found in multitude of industries like textiles, paints, inks, plastics, adhesives, flavors/fragrances and also in paper industry. Extensive applications are also found in construction, automotive, electronics and water treatments whereas Active Pharmaceutical Ingredients (API) constitutes the largest segment of the specialty chemical industry. The industry size is about US$15 Billion and this growth momentum is backed by cost efficiency and a large pool of engineers & scientists whose emphasis and expertise on R&D is leading to new discoveries Major drivers for specialty chemicals are favorable macroeconomic factors in India and growing export market with scope for import substitution. Moreover, there is a great potential of chemical demand in India as per capita chemical consumption is relatively low compared to global and Asian countries. In the past, markets like Western Europe, North America and Japan constituted a majority of global specialty chemicals but this status is expected to change in the near
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3.3 Knowledge Chemicals Knowledge chemicals constituted a USD 420 billion industry, accounting for 28 per cent of the global chemical industry in 2002. The Knowledge chemicals segment consists of highly differentiated chemical and biological substances used to induce specific outcomes in humans, animals, plants and other life forms. The segment is characterized by a high degree of research, intellectual capital and skilled manpower. The segment comprises agrochemicals, pharmaceuticals and biotechnology sub-segments, with pharmaceuticals being the largest. However in the future, biotechnology is expected to be the most dominant segment as product applications are being developed to either substitute or to provide improved manufacturing processes for each of the chemical segments viz. Basic, Specialty as well as Knowledge. This segment relies extensively on R&D for new products. Most of the R&D is capital intensive and the scale of operations is important to provide the financial strength and access to global markets. Patents and the presence of appropriate regulations to protect intellectual capital is a key consideration for players wishing to enter new markets.
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2651
2078
2002
Saurashtr a 10%
Nirma 15%
GHCL 24%
1989
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2058
2298
User Segmentation Water Treatm't 10% Dye Stuffs 5% Others 22% Pharma 4%
Al 9%
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1891
1891
1277
1387
1403
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1440
2008-09
1860
1387
2330
1891 1504
2007-08
1860
1277
2202
1860
2202
1860
2330
2469
2605
1682
1294
2087
2735
Installed Produced
Demand
Source: CIER, ISI Emerging Markets 4.5 Carbon Black Carbon black is a form of amorphous carbon that has a high surface-area-to-volume ratio, although its surface-area-to-volume ratio is low compared to that of activated carbon. Carbon black is widely used as a model compound for diesel soot for diesel oxidation experiments. Over the last 5 years (2007-12) demand for Carbon Black in India has grown at a CAGR of about 6.0% and is expected to grow at 7.4% for the next five years.
Major Manufacturers Phillips Carbon Black (40% Market Share) Aditya Birla Nuvo (35% Market Share) Cabot India (10% market Share) Indian Rayon 2011-12 Continental Carbon 655 452.44 670 User Segments Tyres Rubber Paints Dyes Carbon Black (in 000' MT) 2007-08 2008-09 2009-10 2010-11 Installed 455 455 455 455 Produced 422.47 426.96 371.39 219.43 Demand 530 559 587 623
Source: CIER, ISI Emerging Markets 4.7 Formaldehyde Formaldehyde is an important methanol derivative which is used in numerous industrial applications. Formaldehyde is more complicated than many simple carbon compounds because it adopts different forms. It is an important precursor to many other chemical compounds, especially for polymers. Over the last 5 years (2007-12) demand for Formaldehyde India witnessed a CAGR of about 5.6% and is expected to grow at 5% CAGR for the next five years.
Major Manufacturers Kanoria Chemicals (20% Market Share) HOCL (20% Market Share) Atul Nuchem Kothari Phetochemicals User Segments Urea, fertilizers Melamine resins Speciality chemicals Precious metal recovery Textile fabrics Formaldehyde (in 000' MT) 2007-08 2008-09 2009-10 2010-11 2011-12 Installed 311.54 311.54 315 315 315 Produced 234.82 242.76 231.84 259.67 266.6 Demand 312.3 329.5 352.6 375.5 394.3
Acetic Acid (in 000' MT) 2007-08 2008-09 2009-10 2010-11 2011-12
Major Manufacturers DCM Shriram (15% Market Share) Elfotech Electro Chemicals Birla Corp Swan Industries
User Segments Acetylene Vinyl Acetate Monomer (VAM) Calcium Cyanamide Steel Making Carbide lamps
Source: CIER, ISI Emerging Markets 4.9 Dyes and Dye Stuffs Dyes are soluble substances which are used to pass color to the substance. Major end use industries are textiles and leather. There are 12 types of dyes, classified on the basis of the usage, however disperse, reactive and direct dyes are the most commonly used in India. Over the last 5 years (2007-12) demand for Indian Dye stuffs witnessed a CAGR of about 6.5% and is expected to grow at 5.5 % CAGR for the next five years.
Major Manufacturers Atul Products Sudarshan Chemicals Metrochem Inds Ciba Speciality Pidilite
Dye Variants Disperse dyes Azoacid & direct dyes Organic pigments Reactive dyes Sulphur dyes
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Growth drivers Rise in disposable income and changing demographic profile Strong growth in end-user industry including automotive and home appliances Increasing demand for affordable housing schemes Rise in demand for repainting of real estate properties High consumer involvement due to extensive brand building Introduction of small sized sampler cans and other offers such as hassle free painting Paint companies targeting niche segments such as children in the metropolitan and urban areas
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Chemical Draft Policy proposes to consolidate acts into an Integrated Chemical Legislation which will cover entire life cycle of chemicals and thereby simplifies regulatory structure and also strengthen regulations. 2. Establish chemical innovation fund & the National Chemical Innovation Council Establish an autonomous USD 100 million chemical innovation fund by securing 10% of the total inclusive national innovation fund set up by the National Innovation Council to encourage commercialization efforts for innovations generating inclusive growth. For which it is proposed to levy an Chemical Upgradation & Innovation Cess at the rate of 0.5% and may be collected by the Excise Authorities, and then subsequently transferred to the DCPC 3. Development of regional clusters and innovation centers in universities dedicated to chemical industry 4. Sign international collaboration agreements with other advanced countries like Germany and Singapore in this sector (which have world class chemical parks with strong R&D and integrated infrastructure of whole chemicals industry chain) to learn and develop capabilities in chemical product and process innovation. 5. Incentives for development of Green Products and Processes
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Apart from these, few other issues that need to be addressed Government should expedite swift implementation of GST to lower transaction costs and avoid cascading of taxes. Currently, the basic customs duty on most chemical feedstock is 2.5%. Import duty on most of the chemical products is at 7.5% and the central excise duty rate is about 10%. Feedstock and basic building blocks for the downstream chemical products should be preferably at zero duty. This should be followed by slightly higher duty for primary chemicals, still higher for secondary chemicals and still higher for final products/chemicals, to provide an opportunity for value addition and also provide adequate competitive protection. Example, Naphtha which is a basic feedstock, should have zero duty, followed by slightly higher duty for primary products like Ethylene, Propylene, Butadiene etc. and still higher duty for secondary products like Polyethylene, Polypropylene etc.
Ministry of Chemicals and fertilizers estimates Indian chemical industry to grow between 11% p.a. and 15% to reach the turnover between $224 billion and $290 by 2017, given the provisions of National Chemical Policy are implemented.
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Source: Moneycontrol.com
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Ammonia 1520 Tonnes Per Day Urea 864000 Tonnes Per Annum 2.5 Million Tonnes Per Annum 1.3 Million Tonnes for Soda Ash
USA (Tata Chemicals North America) UK (Tata Chemicals Europe) Kenya (Tata Chemicals Magadi)
Green River Basin, Wyoming Northwich West (Winnington) and Northwich East (Lostock) sites Lake Magadi, Kenya
Chemicals: Soda Ash Chemicals: Soda ash, sodium bicarbonate, calcium chloride, associated alkaline chemicals
Salient Features Market Leader in Edible salt segment with a market share of 64% Global capacity of soda ash is around 5.5 Million Tonnes p.a., TCL is worlds second and Indias largest producer of soda ash Dual feedstock Babrala facility in urea production - most efficient in India Tata Chemicals has recently won the FICCI Water Awards 2012 in the category of Innovation and Community Initiatives. Recorded its all-time highest net earnings from core operations in 2011-12 Growth Factors: Recently expanded its salt capacity by 200,000TPA by expending 180 crores Finished debottlenecking SSP plant in Haldia to add 50,000 tonne per annum A new 50,000 tpa sodium bicarbonate plant in Europe, targeted at flue gas treatment applications Risks and Concerns: Uncertain economic and depreciating rupee is a matter of concern as it impacts import of raw materials and feedstock. Monsoon uncertainty poses a gloomy market for urea and fertilizers. In FY13Q1 TCL witnessed reduced production of di-ammonium phosphate (DAP), which is a key revenue generator, owing to an impasse over phosphoric acid price (is a key raw material for making phosphate-based fertilizers, especially DAP) and two months of Haldia plant shutdown.
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Net Fixed Assets 387.61 1599.48 1385.73 1415.47 1356.64 1221.04 153.61
344.33
382.41
Operating Profit
PAT
232.63 171.84
224.09
192.27
262.92 114.3
R & D Activities The company is involved in Research and Development activities with specific focus on specialty chemicals, cooling water treatment, process improvement, cost reduction, import substitutes, technical backup to Operations / Marketing / Purchase Departments and absorption of new technologies. The designing of 100 MT / month capacity Pilot Plant for Sodium Per carbonate is under progress which is based on the process development work and data generated at our R & D Centre.
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Key Ratios Debt/Equity Core EBITDA Margin(%) EBIT Margin(%) Pre Tax Margin(%) PAT Margin (%) ROCE (%) ROE (%)
Source: Moneycontrol.com
Risks & Concerns Timely and successful completion of expansion projects Intense competition from domestic as well as international market Rise in raw material prices due to scarcity in the global market Increasing power & fuel cost which is major input for production Ability to sustain margins in a cyclical and price sensitive industry
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Operating Profit
PAT
212.97 148.31
135.05 92.08
127.42 88.76
176.33 120.14
BPIL is also on a massive expansion mode and is expected to increase its capacity from current 24000 tonnes per month to 42000 Tonnes per month by the end of 2013. Berger Paints is considered one of the most expensive stock as its Price to Earnings is around 26.35 the second highest in paint industry. Over the past 5 years, the company has seen dynamic growth in both its revenues as well as earnings. On a consolidated basis, revenues grew at a compounded annual growth rate (CAGR) of 21% while net profits grew at a CAGR of 20%, the companys market capitalization grew at 34% CAGR.
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Key Ratios Debt/Equity Core EBITDA Margin(%) EBIT Margin(%) Pre Tax Margin(%) PAT Margin (%) ROCE (%) ROE (%) Earnings Per Share (Rs)
Expansion & Upcoming Projects Automated water based paint plant at Hindupur in Andhra Pradesh is in full swing. The first phase of the Project is expected to be completed by the middle of calendar 2013. The first phase of the plant will give BPIL 160,000 MT water based paint capacity. Once fully completed, the capacity of the plant will be 320,000 MT per annum for water based paints and 100,000 MT for the emulsions per annum. Work on expansion of the water based paint plant at Rishra (from 18000MT to 78000MT per annum) and at Goa (from 28,000 MT to 78,000 MT per annum) is expected to be completed by end of 2012.
Risk Factors: Costs of key raw materials like zylene and toluene (aromatic hydrocarbons commonly used as solvents in industrial paints) and Mineral Turpentine Oil - MTO (which accounts for 35% of solvent based decorative paints raw material cost) have been on rise which might force BPIL to raise prices of its paints. A slowdown in the economy is the biggest risk for the paints industry, as about 75% of demand for decorative paints arises from repainting, which, in turn, depends heavily on the countrys economic condition. Slowdown in real estate and industrial growth poses the biggest threat to volume growth. A rise in crude oil price could hurt the companys margin as crude derivatives account for 35-40% of Berger Paints input costs
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Fertilizer sector
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Fertilizers
Nitrogen Based(N)
Phosphate based(P)
Potassium based(K)
Complex
Urea
Muriate Of Potash(MOP)
India has achieved near self-sufficiency in production capacity of urea and about 77% of consumption is met through domestic production. In case of phospatic fertilizers, nearly 50% of domestic requirement is met through imports. For potash (K) since there are no viable sources/reserves in the country, its entire requirement is met through imports. Fertilizer consumption has increased from 0.07 million MT in 195152 to more than 286 Lakh Metric Tonne (LMT) in 201011 and per hectare consumption, has increased from less than 1 Kg in 195152 to the level of 135 Kg. Indias fertilizer consumption has shown CAGR of 3.3%. Urea accounts for 50% of Indias fertilizer consumption followed
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2. Nitrogenous Fertilizers Out of three main nutrients namely nitrogen, phosphate and potash, (N, P &K) required for various crops, indigenous raw materials are available mainly for nitrogenous fertilizers. The Governments policy has hence aimed at achieving self-sufficiency in the production of nitrogenous fertilizers based on utilization of indigenous feedstock. Prior to 1980, nitrogenous fertilizer plants were mainly based on naphtha as feedstock. A number of fuel oil/LSHS based ammonia-urea plants were also set up during 1978 to 1982. However, with natural gas becoming available from offshore Bombay High and South Basin, a number of gases based ammonia-urea plants have been set up since 1985. As the usage of gas increased and its available supply dwindled, a number of expansion projects came up in the last few years with dual feed facility using both naphtha and gas. Feasibility of making available Liquefied Natural Gas (LNG) to meet the demand of existing fertilizer plant and/or for their expansion projects along with the possibility for utilizing newly discovered gas reserves is also being explored by various fertilizer companies in India. Urea is the major fertilizer that is extensively consumed in nitrogenous fertilizer segment. The production of Urea has increased from 187.3 LMT in 2003 to 211 LMT in 2009-10. The capacity utilization has been over 100% due to revamping and modernization of existing plants. NFL, IFFCO are the largest producers of Urea in India.
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In 2011, GoI appointed a committee to suggest improvements in the old urea investment policy as the latter failed to encourage investments due to lack of transparent gas price pass through mechanism. While, an Empowered group of ministers (EGoM) approved the new urea investment policy in Feb 2012, the industry has been awaiting final approval by the Cabinet Committee on Economic Affairs (CCEA). The new investment policy provides for implicit pass through of gas prices up to US$14/mmbtu and designs floor and cap urea prices at each level of gas price to ensure minimum of 12% and maximum of 20% post tax RoE respectively. Due to requests by the industry to increase cut off gas prices beyond US$ 14/mmbtu, the finalization of the policy has been held up.
3. Phosphatic Fertilizers
Phosphatic fertilizers are of 2 types straight phosphatic and NP/NPK phosphatic. The usage of straight phosphatic fertilizers is not so popular in India. NP (Nitrogen, Phosphate based) or NPK (Nitrogen, Phosphate, Potash based) with high concentration of phosphate are general employed. Urea Ammonium Phosphate [N-P 24-24] and Di Ammonium Phosphate [N-P 18-46] are few examples of NP fertilizers. In case of phosphates, the paucity of domestic raw material has been a constraint in the attainment of self-sufficiency in the country. Indigenous rock phosphate supplies meet
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4. Potassic Fertilizers
In the absence of commercially exploitable potash sources in the country, the entire demand of potassic fertilizers for direct application as well as for production of complex fertilizers is met through imports. The only fertilizer used is Muriate of Potash (MOP) and 52.86 LMT of MOP was imported in 2010 for both Industrial and agricultural use.
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The demand for complex fertilizers has averaged at around 6% over FY 2008-10. The trend in production for complex fertilizers differs from that of DAP due to substitution between the two, depending upon subsidy and international price levels, as reflected in the varying consumption patterns. A positive development has been the opening up of imports of complex fertilizers with effect from 1 April 2010 and the move towards Nutrient Based Subsidy (NBS), which has encouraged the consumption of customized complex fertilizers. As a result of healthy demand growth and higher availability, the demand for complex fertilizers increased by 33% in 2011 over 2009-10. The resilience in demand growth in a period marked by an increase in complex fertilizer prices by around Rs. 1,000/tonne proves the underlying potential in the sector.
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6. Agrochemicals
India is the fourth largest producer of agrochemicals globally, after United States, Japan and China. The agrochemicals industry is a significant industry for the Indian economy. The total demand for agrochemicals in India stood at $ 1.51 Bn in FY11, of which 53% was exports. Imports to India are minimal and mainly limited to next-generation pesticides and patented molecules. The current domestic production of $ 0.71 Bn is expected to grow at 8% annually, driven by rising population, decreasing per capita availability of arable land and focus on increasing agricultural yield. In the same period, exports are also expected to grow at a rapid pace (15% annually), driving the total agrochemicals market size to almost $ 11 Bn by 2020.
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India's agrochemicals consumption is one of the lowest in the world with per hectare consumption of just 0.58 Kg compared to US (4.5 Kg/ha) and Japan (11 Kg/ha). The key reasons for low usage are low purchasing power of farmers, lack of awareness about crop protection benefits and poor reach and accessibility of crop protection chemicals. Annual crop losses due to pests are estimated at $ 17 Bn for FY09. Key Players in this segment are United Phosphorus Limited (UPL) and Rallis India have a market share of around 10% and 5% in Indian domestic market. UPL is aggressively investing and executing acquisitions of a total net worth of INR 10 billion. Several Multinational companies have entered into marketing tie ups with domestic players Dupont, Bayer and Syngenta have tied up with United Phosphorus while other big players like Sumitomo, Nissan, Nitsui and Chemitomo have alliance with Dhunuka Agritech Arysta Lifesciences, based in Tokyo, acquired majority stake in Devidayal Sales Ltd in March 2011 Sumitomo Chemicals and Willowood Chemicals also acquired stakes in domestic companies - New Chemi Industries and Sreeji Pesticide respectively
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Key Segments: Insecticides: Insecticides are used to ward off or kill insects and pests. Consumption of insecticides for cotton has come down to 50% from 63% of total volume after introduction of BT cotton. Major insecticides & Pesticides produced in India Production (in 2007 2008 2009 Metric Tonnes) Total Insecticides & 84701 83430 85340 Pesticides Mancozab 22875 27115 35338 Acephate 8333 10059 9652 Monocrotophos 4913 5118 4570 Cypermethrin 5064 4659 4034 Isoproturon 3150 2962 2979 Chlorpyriphos 4715 4539 3887 D.D.V.P. 3890 3292 2734 D.D.T. 4495 3441 3305 Phorate 5713 3229 2029 Glyphosate 2100 1517 2331 Aluminium 1526 1615 1722
2010 82190 31490 10830 5740 6230 2910 2900 3120 3610 2000 1700 2160
2011 81220 26050 12840 8600 4950 3900 3350 3130 3090 2630 2280 1800
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Industry Structure: The domestic agrochemical industry is controlled by Government of India which mandates registrations for sales, consumption and trade of products The registration procedure is complicated and new entrants have to undergo cumbersome process Based on the level of processing, the domestic agrochemical sector comprises of technical grade pesticide manufacturers as well as formulators Technical grade manufacturers produce bulk quantities of high purity pesticides and are highly regulated There are around 125 technical grade manufacturers in the Indian organized agro chemical sector including around 10 multinationals Formulators essentially process technical grade pesticides with other agents/emulsifiers Lack of product patents till recently, encouraged the entry of unorganized formulators Trade Scenario: India is noted exporter of generic agrochemicals and overall exports were valued at INR 52 billion (173170 tonnes) in 2010-11 registering per year growth of around 16% in preceding 5 years.
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Operating Profit
PAT
Net Block
807.1
824.09 496.38
728.59 468.2
1018.61 694.46
512.27
436.29 209.76
465.6
297.05
387.69
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807.1 733.64
1202.73 693.27
804.04
793.7
764.04
Key Concerns: Sharp increase in long term and short term debt levels of the company Deficit monsoon might push farmers to choose cheaper fertilizers Inventory of CRIN is at all-time high, the reduced subsidy by GoI might prove disastrous if demand for complex fertilizers may not be same as estimated Volatility in raw material supply and prices Rupee depreciation and volatile foreign exchange
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