GROUP D

Ali Asghar Poonawala, Syed Taha Owais. Jehanzeb Hassan Khan,

Mohammad Ibad Desmukh, Mohib Umrao, Maisam Ali Shams,
Minhaj Ahmed

1
Company Overview
Formerly a group company of ICI PLC UK which was globally
acquired in 2008 by AkzoNobel
Lucky holdings acquired shareholding of ICI making it a part
of Yunus Group
YB group is largest export house and cement manufacturer



Vision: As the partner of choice, we aspire to build our local
and international footprint through sustainable growth and
by creating value for all our stakeholders.
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Polyester (48%) Soda Ash (24%) Life Sciences (17%) Chemicals (11%)
Primary Sector: Refinery, Natural Gas, Mineral, Agriculture,
Farming
Secondary Sector uses output from the primary industry to
further process for products such as polymers and plastics
3
Industry Overview
Soda Ash
2 Plants in Khewra Mine Region
43% consumed in Glass Silicate
production, 28% in Textile, 7% in
Soaps, 11% for Paper
Pakistans current production
capacity is 470,000 MTPY while
demand is 364,000, surplus can be
exported to foreign markets

Polyester Fiber (PSF)
5 major producers with total
capacity of 636,000 tons per annum
Major players are ICI, Rupali,
Pakistan Synthetics and Ibrahim
Fibers
Extensive load shedding of power
and limited gas supply resulted in
lower demand for PSF
Dumping from China
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Key Competitors
Olympia Chemicals
Fibres
Polyester Staple Fibre (PSF) manufacturing Plant having a
capacity to produce 70,000 tons of PSF per annum.
Established Ibrahim Energy Limited, a 31.8 MW power
generation plant.
The expansion unit of Polyester plant started commercial
production thus increasing the PSF production capacity from
70,000 tons per annum to 208,600 tons per annum.
2001
Acquired Allied Bank Limited, one of the five largest
commercial banks in Pakistan
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Ibrahim Group (Fibres)


Primary activities
Marketing and Sales Production
Research and
development
Distribution
Regular market
visits
Maintaining close
contacts with the
customers
Product
knowledge and
technical
knowledge
Market Research
Polyester fiber

Professional
Staff

Trained staff
Proper
transport
channel
On time
delivery
6
Ibrahim Fibers - Value Chain Analysis

Support activities
Human Resource
Management
General
Administration
Technology
Performance and
Compensation
Management, Recruitment,
Training and Selection
General management,
accounting, safety and
maintenance
Computer system,
internet, updated
machinery and plants
Manufacturing and marketing of
Soda Ash and Sodium
Bicarbonate
Combined annual revenue of
$300 million
Customers are glass, paper, soap
and detergent manufactures.
Exporting to UAE, South Africa,
India, Sri Lanka and Bangladesh.
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Olympia Chemicals (Soda Ash)
8
Porters Competitor Analysis

Ibrahim Fibers Olympia Chemicals
Current Strategy
Modernization & Expansion
Investment in Power
Generations
Export to foreign markets
Growth in capacity
Objectives
Sustainable Growth
Remain Competitive
Become leading Soda Ash
producer
Consistent growth
Assumptions
Sufficient future demand
No energy issues
Minor Price Fluctuations

Resources &
Capabilities
30 years experience
Synergy with textile, bank
and power plant

Strong distribution
network
40 years experience
Exporting to UAE, South
Africa

Valuable? Rare? Costly to
Imitate?
Level of
organization
Implications
Experienced
Management
Yes No No No
Parity
Diversified
Portfolio of
Businesses
Yes Yes Yes Yes
Sustained
Strong
Partnerships
Yes Yes Yes Yes
Sustained
Large
Capacity
Yes Yes Yes No
Temporary
Ease of
Capital
Access
Yes No No No
Parity
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VRIO Analysis of ICI Pakistan
The switch to coal in both the PSF and Soda Ash divisions is set to
provide expansions in gross margins and the bottom line due to
fuel cost savings as well as improved soda ash plant utilization.
Low domestic demand and frequent gas outages resulted in a
capacity utilization of 73% in the soda ash division
Due to low margins, the plant was not able to operate at full
capacity, resulting very low exports
Yunus Brothers Group has strong presence in the textile sector,
which will create synergies for ICI
The company has a stable dividend payout history, where they
have sustained the dividend payout ratio above 50% in the past
Strong profitability growth is likely to lead to higher payouts as the
management aims to optimize RoE
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Financial Analysis of ICI Pakistan





11
SWOT Analysis of ICI Pakistan
STRENGTHS
Leading manufacturer of chemicals in
Pakistan
Highly Trained Employees
40 years, strong track record
Extraordinary research
Excellent management team
Synergies with Yunus Holdings
WEAKNESSES
Prices are too higher than competitors
High switching rates
Barrier perception from Middle Class
Some resources are easy to imitate

OPPORTUNITIES
Abundant resources for market
expansion
Potential market for better quality
products
Growing export market demand and
globalization
Exploit synergies with Yunus/Lucky

THREATS
Competitors are rapidly expanding
Availability of capital to competitors
Government policies
Political Instability
Economic Crisis
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STRATEGIC INITIATIVES AND IMPLEMENTATION
Three Tiered Strategy
Tier 1: Differentiation Strategy
Tier 2: Vertical Integration
Tier 3: Product Diversification
To be the partner of first choice for customers and suppliers,
ensuring sustained leadership positions in the markets where we
compete, delivering long-term business value through a high
performance culture, innovation, ethics and responsible care.


To achieve our mission we will:

Give highest priority to health, safety, environment and ethical
matters
Ensure our products deliver maximum value to customers by
maintaining dependable supply, consistent quality, and reliability
Uphold excellent service levels to foster long-term relationships
with customers and suppliers
Achieve the highest possible operating efficiencies and lowest costs,
and expand the business through selective capacity increase and new
product launches
Develop and retain a team of highly capable people dedicated to
delivering the mission
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Proposed Mission Statement
Even though cost control is essential, ICI should not comprise
on its quality
Market position would be greatly affected
ICI should opt for a differentiation and focus strategy and it
should continue to pursue it

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A. Differentiation Strategy
The rising cost of sales as well as the energy crisis presents ICI
with the opportunity to form backward linkages.
Since the raw materials of both Soda Ash and PSF have been
increasing, an opportunity exists to form backward linkages in
the manufacture of raw materials for both these products
Nishat Mills are primarily a textile goods manufacturer
company and Formed a subsidiary called Nishat Power
A similar strategy can be applied by ICI, if they truly want to
increase their operational efficiency and plant load.

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B. Vertical Integration
1. DIVERSIFY INTO THE PACKAGING BUSINESS
Moderately feasible (cost of acquiring or building a plant from scratch
could be high).
Cost savings possible through use of Soda Ash and other chemicals
produced by ICI
Experience is a critical factor in the competitive advantage that Packages
Ltd has over other small players in the packaging industry. This could be a
major hurdle for ICI.
There is a huge market for packaging in Pakistan particularly in the
business to business segment with major customers being food etc
In the B2C segment the market is dominated by Packages Ltd. which sells
the Rose Petal brand.
Demand will continue to grow with the dominance of the FMCG sector in
the Pakistani economy.
Since the major portion of the business will come from B2B, ICIs brand
image should not be a major factor in the decision making process.
Quality and reliability which go with the ICI brand perception could be
advantageous though for customers such as Unilever and Engro.
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C. Product Diversification
2. DIVERSIFY INTO CONSUMER HEALTHCARE
Engage in the business of developing, manufacturing and
marketing non-prescription medicines, vitamins and
nutritional products.
This venture would allow ICI to leverage on its expertise in
the pharmaceutical and chemical aspect of its current
business and add a wide range of products to its portfolio,
such as:
1. Oral hygiene
2. Multi-vitamins
3. Pain suppressants (analgesics)
4. Skincare
5. Nutritional drinks
6. Anti-bacterial soaps
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C. Product Diversification
Assumptions
1. The idea of expanding into the B2C market, is in line with
the ICIs vision of Cultivating Growth.
2. ICI is willing to form a team, where the focus would be on
production and marketing of the product to the consumers
3. The growth in the Consumer Health market falls in line
with the said forecasts
Risks
1. Consumers still perceive ICI as a paints manufacturer.
Changing this perception is going to take a lot of effort.
2. Internal and external marketing will require a lot of
investment.
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C. Product Diversification
Buying 100% of ZIL Limited (formerly Zulfeqar Industries
Ltd.) .
ZIL Ltd excels in soap manufacturing with an experience of
over 50 years.
Capris Natural Skincare and Wellness Range delivers a
lifestyle to consumers in the premium segment.
Palmy is positioned on the affordable beauty platform and
gives consumers the best quality product in the popular
segment.
Opal was launched with an innovative concept of multi-
packs i.e. four soaps in one pack, giving consumers best
value for money.
Champion and King Swan in the discounted segment offer
value conscious consumers viable options and solutions for
everyday laundry wash.

19
Target Acquisition

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Valuation Metrics
ZIL Limited Sector (Peers)
Average EPS Rs 7.36 Rs 4.85
EPS Rs -4.61 Rs 10.87
Dividend (last 4 quarters) Rs 4.50 Rs 2.24
Dividend Yield 2.32%
Book Value Rs 77.20 Rs 147.08
Outstanding Shares 5,324,000 -
Net Current Asset Value /
Share
Rs 5.45

-
Total Assets Rs 1,006.00 (In Millions) -
P/E 107.51 52.35
Current Price Rs 95.10 -
DCF Value (based on EPS) Rs -37.66 -
DCF (Free Cash Flow) Rs -78.26 -
DCF Value (Dividends) Rs 36.76 Rs 0.97
Soda Ash, a major resource for Soap production is a
part of ICIs product portfolio.
Soda Ash could be used at lower cost and supplied to
the newly acquired factory which is located in
Hyderabad
Other chemicals in the ICI Chemicals Business could
also be utilized
ZILs chemical suppliers could be potential business
partners
ICI can avoid paying these synergies to ZIL Limited by
making a complete acquisition of the business
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Post Acquisition Synergies
Thank You
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