Black Rose Industries Ltdbreport.myiris.com/SKPSEC/ASIFAB_20150604.pdf · 2015-06-05 · Black Rose Industries Ltd. SKP Securities Ltd. Page 2 of 16 • Acrylamide is an odorless

June 4, 2015

Black Rose Industries Ltd Game changing entry in a niche business

CMP: ` 16 Target: ` 28 Initiating Coverage: BUY

SKP Securities Ltd www.skpmoneywise.com Page 1 of 16

Analysts: Nikhil Saboo Tel No: +91‐33‐40077019; Mob: +91 9330186643 Email: [email protected] Vineet P. Agrawal Tel No.: +91‐22‐4922 6006 Email: [email protected]

Source: BSE

Company Profile Incorporated in 1990, Black Rose Industries Limited (BRIL), has recently entered niche business of manufacturing Acrylamide (only one in South Asia), which finds extensive usage in manufacture of polymers used in growth industries like waste water treatment, paper, mining, oil & gas, shale gas extraction, etc., in Gujarat at Capex of ` 362.4 mn, Hitherto, BRIL was primarily engaged in chemical distribution in India and abroad, importing, distributing, and exporting a range of specialty chemicals, performance chemicals and rubber chemicals. It also manufactures textile based industrial safety products and operates two windmills, although their contribution to company’s performance is insignificant. Investment Rationale – Acrylamide will change the shape of BRIL’s financials; Topline to grow at a CAGR of ~33% over FY15‐17E; Future growth opportunities

Hitherto, Acrylamide users in South Asia were using solid acrylamide, due to non‐availability of liquid Acrylamide. Now, with the availability of liquid acrylamide from BRIL, end‐users are converting their manufacturing process to use liquid acrylamide due to its inherent advantages in enhancing manufacturing efficiency and reducing costs.

As a fresh set up in FY14, BRIL produced 670.2 MT of Acrylamide, which grew to 3,631 MT during FY15 and is expected to grow to 8,200 MT and 15,500 MT in FY16E and FY17E respectively.

Increasing customer approvals is proving visible growth in demand in domestic markets and orders are also expected from international markets like Australia and South East Asia. BRIL is in the process of doubling its Acrylamide capacity from current 10,000 MTPA to 20,000 MTPA with a relatively smaller capex of ` 40‐50 mn, by December 2015. Capacity utilization is expected to touch ~78% of expanded capacity in FY17E with net turnover of ` 1.15 bn. Exports are expected to rise to ~` 748 mn in FY17E from ~` 19.3 mn in FY15. Chemicals Distribution Business is expected to grow with a CAGR of 10% during FY15‐FY17E with rise in demand for existing products like Resorcinol and new product additions.

BRIL Net Sales is expected to grow to ` 2,585.5 mn by FY17E at a CAGR of ~33% with Acrylamide Sales comprising ~ 44% of sales.

With depreciating INR and BRIL being a net importer of chemicals, its consolidated margins have been under pressure at 1.9% in FY14. However, on account of a stable Rupee and Acrylamide contributing EBIDTA margin of ~11.5% during the period, BRIL reported an EBIDTA Margin of 4.4% during FY15. Going forward, with improved product mix, EBIDTA Margin is expected to improve considerably to cross 10% by FY17E.

BRIL incurred a loss of ` 27.2 mn during FY14 at PAT level, resulting in negative PAT margin of 3.2%, mainly on account of unabsorbed depreciation of the new Acrylamide plant and underutilized Acrylamide capacity. It has now improved to a positive 0.4% in FY15. With increase in production of Acrylamide, we expect PAT margin to improve to ~5% by FY17E.

With limited technology sources for manufacturing of liquid Acrylamide, BRIL enjoys a strong first mover advantage in South Asia.

Acrylamide is the basic raw material for Polyacrylamides, which had a domestic market of only 7,000 MT in CY14. With exponential rise in demand from the oil & gas industry, it has already grown to 32,000 MT in CY15 and is expected to grow to 47,000 MT in CY16 and 60,000 MT in CY17. This should bode well for Acrylamide, creating further growth opportunities for BRIL, for which, entry into Polyacrylamides could be a natural sequence.

Outlook & Recommendation:

With BRIL’s successful regional first mover advantage in niche Acrylamide finding extensive usage in several growth industries, its expansion backed by demand at low incremental capex, good future growth opportunities and strengthening of its chemicals distribution business, BRIL revenues and margins are expected to increase steadily in coming years.

We have valued the stock on the basis of EV/EBIDTA ‐ of 7.0x of FY17E EBIDTA and recommend a BUY on the stock with a target price of ` 28/‐ (~75% upside) in 18 months.

Key Share DataFace Value (`) 1.0Equity Capital (` mn) 51.0M.Cap (` mn) 816.052‐wk High/Low (`) 27/4Avg. Daily Vol 20531BSE Code 514183NSE Code ‐‐Reuters Code BRIL.BOBloomberg Code BROS:IN

Shareholding Pattern (as on Mar 31, 2015)

75%

25%

Promoters

Public & Others

Particulars FY14 FY15 FY16E FY17ENet Sales 847.5 1470.1 1862.9 2585.5Sales Gr. 0.5% 73.5% 26.7% 38.8%EBIDTA 16.2 64.0 146.3 269.3Adj. PAT ‐27.5 5.5 48.0 129.3PAT Gr. ‐268.3% 120.1% 770.1% 169.2%EPS (`) ‐0.5 0.1 0.9 2.5CEPS (`) ‐0.1 0.7 1.5 3.1

Financials (` mn)

Particulars FY14 FY15 FY16E FY17EInt Cover (x) ‐0.2 0.7 2.2 4.1P/E (x) ‐‐ 147.8 17.0 6.3P/BV (x) 4.4 4.2 3.4 2.2P/Cash EPS (x) ‐‐ 24.5 10.9 5.2M.Cap/Sales (x) 1.0 0.6 0.4 0.3EV/EBIDTA (x) 71.6 18.9 8.5 4.7ROCE (%) ‐1.0% 6.1% 17.6% 28.5%ROE (%) ‐14.7% 2.9% 19.9% 34.9%EBIDTM (%) 1.9% 4.4% 7.9% 10.4%NPM (%) ‐3.2% 0.4% 2.6% 5.0%Debt‐Equity (x) 1.9 2.1 1.8 1.3

Key Ratios

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BSE SMALLCAP

Black Rose Industries Ltd.

SKP Securities Ltd. www.skpmoneywise.com Page 2 of 16

• Acrylamide is an odorless and transparent liquid solution, prepared by hydrolysis of acrylonitrile (ACN) in the presence of industrial enzyme.

• Applications: Acrylamide is majorly used to synthesize acrylamide based polymers which finds many uses such as water soluble thickeners and flocculants for waste water treatment, polymers for enhanced oil recovery (EOR), shale gas extraction, shale strengthening, binders and retention aids for paper and also in making waterproofing chemicals, coating and paint emulsions, ore processing, sugar manufacturing, cosmetics etc.

• Application wise global bifurcation of Acrylamide at a glance:

Applications – Acrylamide (as polymers) % Market Size

Water management 37%

Oil& Gas Sector (Including EOR and hydraulic fracturing)

20%

Pulp and Paper Manufacturing 20%

Mining 8%

Coating 5%

Printing & Dying 2%

Other Applications 8% Source: Acrylamide – By Tran Tech Consultants Inc – August 2014

• For acrylamide polymers water management is the leading segment in USA and Western Europe (47%), whereas paper manufacturing dominates Japanese (60%) markets. EOR is the largest segment in Chinese markets with ~35% share.

• Global Acrylamide consumption: China is the largest consumer of acrylamide with 440,000 MTPA followed by Western Europe (175,000 MTPA), USA (162,000 MTPA), Japan (43,000 MTPA) and Asia/ME (26,000 MTPA). Global consumption of acrylamide at a glance:

Geographies % Consumption

China 46%

USA 17%

Western Europe 18%

Japan 6%

Americas (Ex‐USA) & Asia (Ex‐China, Japan) 13%

Source: SKP Research

• Industry Dynamics: SNF Floerger (SNF), France; and Mitsui Chemicals Inc, Japan; are the

major players operating in the acrylamide market globally, with a combined market share of ~37% in 2013.

• BRIL has sourced technology from Mitsui Chemicals under an exclusive technology license agreement.

Acrylamide ‐ The Industry at a Glance



• Global & Indian Market Size for acrylamide: Global production for acrylamide is ~1.6 mn

MTPA in CY13 (800,000 MTPA of pure product). Current size of the global market is pegged at ~1.8 mn MT, and that of Indian markets is estimated at ~10,000 MTPA (at 50% purity) which was met largely through imports from China until BRIL’s entry into acrylamide.

• Market share of global acrylamide players (2013) is as follows:

Player Region Market Share

SNF France 29.5%

CNPC (captive consumption) China 13.1%

Kemira (captive consumption) Finland 9.8%

BASF (captive consumption) USA 7.7%

Mitsui Chemicals Japan 7.1%

Beijing Hengju (captive consumption) China 6.6%

Dia‐Nitrix (captive consumption) Japan 6.5%

Ecolab USA 2.3%

Anhui Tianrun Chemicals China 4.6%

Jiangxi Agriculture China 1.9%

Henan Huixian, Zhenxing China 1.5%

Ashland Chemicals 1.5% Qixian Polymer Co. China 1.2%

Zibo Xinye Chemical (captive consumption) China 1.2%

Others 5.5% Source: SKP Research

• Globally, the demand for acrylamide is in liquid form, whereas Indian market was largely

consuming solid acrylamide. Now with the entry of BRIL’s liquid acrylamide, Indian market is shifting to consume liquid acrylamide.

• Mitsui technology licensed to BRIL is highly efficient and provides high purity acrylamide through an environmentally friendly zero discharge process. Its considered superior to technologies available in other parts of the world.

• Outlook: Acrylamide's growth prospects largely depends on the growth of acrylamide

polymers (polyacrylamide industry), which is expected to grow globally at a CAGR of ~8%, during next five years, on the back of healthy growth in its primary markets such as water treatment and EOR. Importantly, domestic growth in India has been much higher due to steep increase in demand for acrylamide for the production of ceramic binders and water treatment polymers, and is slated to grow further with the exponential increase in demand for polyacrylamides used in the oil sector for EOR applications.



• The raw material Acrylonitrile (ACN) is available in India from Reliance Industries and is also largely imported from various international vendors. No product supply constraint is envisaged.

• Global demand for acrylamide is expected to grow at a CAGR of 5.1% till 2018. Highest growth is expected from China at 7% per annum, followed by Asia/Middle East with 5% per annum. Growth rate in US and Western Europe is expected to be in range of 2% ‐ 3%, while growth in Japan is expected to be less than 1% and 4% in the remaining regions. Growth in India is expected to be higher at approximately 10% per annum due to the increased demand for the polymers made from acrylamide.

• An Introduction: Black Rose Industries Ltd (BRIL) was incorporated in 1990 as “Asia Fab Ltd”, a textile manufacturing company. It diversified into distribution of specialty chemicals, primarily imported from Japan, leveraging promoters’ extensive network there. However, its recent entry into manufacturing acrylamide will be its game changer and that is the focus area of growth for the company, while it continues with its erstwhile businesses.

• Mr. Anup Jatia, Executive Director of BRIL is a Chemical Engineer from California Institute of Technology (USA) and has spent half his life in Japan. Over more than two decades, he has built up a strong goodwill with the Japanese chemical manufacturers, as distributor of their chemicals in India, who bring new business opportunities for the company.

Source: Company

Acrylamide Business:

• BRIL manufactures acrylamide through its state‐of‐the‐art manufacturing facility located at Jhagadia, Gujarat, having an installed capacity of 10,000 MTPA (at 50% purity). Commercial operations started in September 2013 and this is South Asia’s first and only acrylamide manufacturing plant, producing and supplying liquid acrylamide under the brand name BRILMIDE®.

The Company at a Glance

BRIL’s Businesses

Textiles (Manufacturing since 1990)

Cotton Gloves(Exports to Japan)

Industrial Made Ups (Exports to Japan)

Chemicals Distribution (Distribution Business – 2008)

Specialty Chemicals (Japan, Germany, Korea, China)

Performance Chemicals (Japan, Korea, and domestic)

Acrylamide (Manufacturing ‐ since 2013)

Infrastructure

Jhagadia, Gujarat

Capacity 10,000 MT Type: Liquid Acrylamide



• Raw Materials: Acrylonitrile is the major raw material for manufacturing of acrylamide. Acrylamide is prepared by the hydrolysis of acrylonitrile using an industrial enzyme. For manufacturing 1kg of acrylamide approximately 0.4 kg of acrylonitrile is required and current price of acrylonitrile, in India, is approximately ` 114 per kg.

• Acrylonitrile is a refinery product, thus a crude derivative. Black Rose procures it from Reliance Industries and also imports it from Korea and USA. Acrylonitrile price trend at a glance:

S Korea Price Trend USA Price Trend

Source: Bloomberg

• Leading Clients: BRIL sells acrylamide to water management and chemical companies a few

of which are named below:

Source: The Company & SKP Research

Chemical Distribution Business:

• BRIL is in chemical distribution business since 2008, distributing specialty chemicals and performance chemicals sourced from abroad, in India.

• Product Specific distribution: Under this model, the Company has product specific exclusive tie‐ups with international chemical manufacturers.

• Net Importer: BRIL is the net importer of chemicals and largely imports chemicals from

Japan, Germany, Korea and China. It also procures chemicals from some domestic manufacturers.

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• Significant revenue contributor: A significant portion of BRIL’s revenues come from its chemical distribution business. The segment reported 93% and 79% of the total standalone revenues in FY14 and FY15, respectively. We expect a gradual reduction in contribution from the segment to the overall revenue (65% in FY16E and 54% in FY17E) due to rise in manufacturing of acrylamide.

• Resorcinol – major contributor to specialty chemicals revenues: BRIL distributes more

than 40 specialty chemicals of which Resorcinol is the major contributor, contributing 34% and 31% of total chemical distribution business revenue in FY14 and FY15 respectively. BRIL’s sources Resorcinol from global leader Sumitomo Chemicals Co., Ltd, Japan. Ethanolamine contributes ~16%. Other chemicals, which contribute substantially, are TDI and Meta Cresol.

• Resorcinol is used as an adhesive in the tyre industry. A major portion of Resorcinol market

in India is controlled by BRIL. Atul Ltd is the only manufacturer of Resorcinol in India.

• Performance chemicals include flocculants and coagulants for waste water and effluent treatment, paper processing chemicals, metal ore processing chemicals, sugar processing chemicals, etc. BRIL also distributes cyanoacrylate adhesive known as instant glue.

• Distribution through warehouses: BRIL directly sells duty paid chemicals from its 30,000 square feet warehousing facility. The company has its warehouses at Bhiwandi, Mumbai; Vapi, Gujarat; Chennai and Nhava Sheva, Maharashtra. Warehouses at Nhava Sheva and Chennai are custom‐bonded warehouse.

• High‐sea distribution: BRIL also distributes chemicals through high‐sea‐sales, drastically reducing procurement lead times.

• BR Chemicals Co., Ltd., Japan – BRIL’s wholly owned subsidiary was established in April 2011 to provide further value added services to its clients and principals. It actively promotes and sells Japanese chemicals in India and Indian chemicals in Japan. It contributed ` 310 mn and ` 500 mn to the revenues of BRIL during FY14 and FY15 respectively.

Textiles Business:

• BRIL is engaged in the manufacturing of specialty yarns, textiles, cotton gloves and made‐ups that find niche industrial applications as industrial safety products. The production facility is located in Kolhapur Dist., Maharashtra.

• The segment contributed ~` 11 mn during FY14 and ~` 18.4 mn in FY15, to the

consolidated revenues of the company.



Investment Rationale

1. BRIL is the only manufacturer for acrylamide in South Asia – enjoying first mover advantage:

Advantages of using liquid acrylamide vs. acrylamide powder:

• Cost and logistic advantages: Acrylamide powder is produced by drying acrylamide solution containing water anywhere between 50‐70%. This conversion involves high energy costs, which finally gets passed on to customers.

• Acrylamide is normally used as a liquid solution, for which the powder has to again be dissolved with water.

• Supply process in case of powder acrylamide at a glance:

Source: The Company

• Supply process in case of Liquid acrylamide at a glance:

Source: The Company

• As shown in the diagram above, producing and supplying acrylamide in liquid form to the clients not only saves cost but also processing time.

• Better Purity: By avoiding the drying process, probability of contamination is reduced. The product comes as a solution in de‐mineralized water, helping protect the final reaction from unwanted impurities and process fluctuations. Highly pure acrylamide leads to a more uniform polymerization.

2. Doubling the capacity of Acrylamide for exports:

• The capacity of BRIL’s plant is sufficient enough to meet domestic demand, giving BRIL a competitive edge in India. It has installed and commissioned its first line of 10,000 MTPA with a capex of ` 362.4 mn at Jhagadia, Gujarat which can further be expanded upto 60,000 MTPA at a fraction of the initial investment.



• BRIL is planning to double its capacity of from the current 10,000 MTPA to 20,000 MTPA, in

order to take advantage of robust demand arising from exports to market such as Australia and South East Asia. The capex for incremental capacity is estimated at just ` 40 ‐ 50 mn.

• The additional capacity is likely to commission by December 2015 and expected to generate

further revenue of ~ ` 740 mn at full capacity utilization.

• With incremental capacity in place by December 2015, we expect exports to rise considerably to ~ ` 748 mn in FY17E from ` 19.3 mn in FY15. Export contribution of BRIL vis‐à‐vis its total revenue is at a glance:

3. Top‐line to grow at a CAGR of 33% over FY15‐17E

• Acrylamide: BRIL manufactured just 670.2 MT of acrylamide during FY14, amounting to a

sales value of ` 52.2 mn as several customers required specific product approval to begin procurement from the new plant. Company reached a utilization of 36% of its installed capacity, with the approvals from more domestic clients in place during FY15.

• BRIL is in the process of obtaining approvals from key international clients for exporting bulk quantity of acrylamide. Initial trials have been successful and further trials are already scheduled during FY16. BRIL expects to export 10,000 MT of acrylamide by FY17E.

• Production and topline of acrylamide, with their exponential growth at a glance:

Production (MT) Net Sales (` mn)



784

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Sales in Value (Rs mn) ‐ LHS 810 % Growth ‐ RHS

98% 98% 95% 99% 99%88%

71%

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Exports

Domestic

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Net Sales (Rs mn)

Expon. (Net Sales (Rs mn) )



• Distribution Business: During FY15, BRIL reported standalone net sales of ` 1,470 mn, registering robust growth of 73% y‐o‐y basis. The chemicals business grew by ~50% registering a turnover of ` 1,158.4 mn (excluding Acrylamide turnover), mainly on account of high demand of resorcinol and other chemicals.

• We expect this segment to grow at a CAGR of 10% during FY15‐FY17E with a growth of 5% during FY16E on account of discontinuing certain chemicals with low margins, high competition and unattractive working capital cycle.

• Textiles: The segment contributed about ` 18.4 mn to the consolidated revenues during

FY15. The company will gradually increase its productions of industrial made ups.

• Standalone Product mix at a glance:

4. Margins to expand with better product mix:

• Standalone EBIDTA Margins of BRIL has remained under pressure between FY12‐14. BRIL reported an EBIDTA margin of 1.9% in FY14, which was at peak of 8.4% in FY10. It is the net importer of chemicals and its margins have declined on account of rupee depreciation during the period.

• BRIL reported an EBIDTA Margin of 4.4% during FY15 as contribution from acrylamide reported an EBIDTA margin of ~11.5% during the period.

• Going forward, we expect standalone EBIDTA Margins to improve considerably to ~10% by FY17E backed by improved product mix. With several client approvals already in place and incremental capacity to come by FY16E, we expect contribution from acrylamide, to fetch better EBIDTA margins (~18.4%) over distribution business (~2%), and improve significantly. Value wise contribution from acrylamide is expected to reach ~44% by FY17E.

• Comparative charts, showing increasing EBIDTA margins with incremental capacity utilization of acrylamide are given below:


78.8%

18.6%

1.3% 0.8%0.6%

FY15

Chemical Distribution

Acrylamide

Textiles

Wind Energy

Others

54.1%44.4%

0.7%0.4%

FY17E

Chemical Distribution

Acrylamide

Textiles

Wind Energy

Others



Acrylamide – Installed Capacity and utilization

Acrylamide – EBIDTA & EBIDTA Margin

• EBIDTA Mix of the Company at a glance:


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Installed Capacity (MT) ‐ LHS

Sales in MT ‐ LHS

Capacity Utilization (%) ‐ RHS

1.6 9.9

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EBIDTA in Rs mn ‐ LHS

EBIDTAM (%) ‐ RHS

EBIDTA Mix (` mn) FY14 FY15 FY16E FY17EChemical Distribution 18.6 15.5 18.2 28.0EBIDTA Contribution (%) 85.2% 23.5% 13.4% 10.7%Acrylamide ‐6.7 31.9 105.6 221.4EBIDTA Contribution (%) ‐30.5% 48.2% 77.8% 84.8%Textiles 0.4 2.5 2.5 2.5EBIDTA Contribution (%) 1.7% 3.8% 1.8% 1.0%Wind Energy 9.5 9.5 9.5 9.1EBIDTA Contribution (%) 43.6% 14.4% 7.0% 3.5%Other Operating Income 0.0 6.7 0.0 0.0EBIDTA Contribution (%) 0.0% 10.1% 0.0% 0.0%Total EBIDTA 21.8 66.1 135.8 260.9




• Standalone EBIDTA & EBIDTA Margins at a glance:

• BRIL incurred a loss of ` 27.2 mn during FY14 at PAT level, resulting in negative PAT margin of 3.2%. This is on account of increased depreciation and interest cost which was not absorbed due to low production of acrylamide in FY14. The company has reported an improvement in PAT margin to ~0.4% in FY15. With increase in production of acrylamide we expect the PAT margin to improve to ~5% by the end of FY17E.

Standalone PAT & PATM ROE & ROCE


60.3

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EBIDTA (Rs mn) (LHS) EBIDTM (%) (RHS)


2.4

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6.1% 17.6%

28.5%

‐20.0%

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40.0%


ROE (%)

ROCE (%)



Volatile foreign exchange: As mentioned earlier, BRIL is the net importer of chemicals. Thus any unfavorable movement of foreign exchange rate may adversely affect the results of the company.

Valuation

With an increase in output of acrylamide, revenues and margins of BRIL are expected to increase steadily in the coming years. Further, it is strengthening its chemical distribution business through addition of new products and focused marketing efforts on existing ones. Thus, outlook for BRIL is promising and vibrant.

We have valued the stock on the basis of EV/EBIDTA ‐ of 7.0x of FY17E EBIDTA and recommend a BUY on BRIL with a target price of ` 28/‐ (~75% upside) in 18 months. One Year Forward Looking EV/EBIDTA Band


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Key Concerns



Source: The Company

Particulars Q4 FY15 Q4 FY14 % Change Q3FY15 % Change FY15 FY14 % ChangeNet Sales 398.1 276.5 44.0% 352.5 12.9% 1470.1 847.5 73.5%Raw Material Consumed 51.0 29.4 73.7% 65.8 ‐22.6% 219.7 77.2 184.6%% to Sales 12.8% 10.6% ‐‐ 18.7% ‐‐ 14.9% 9.1% ‐‐Purchase of Traded Goods 299.7 201.8 48.5% 236.5 26.7% 1067.0 678.1 57.4%% to Sales 75.3% 73.0% ‐‐ 67.1% ‐‐ 72.6% 80.0% ‐‐Employee Expenses 6.8 6.9 ‐2.7% 8.0 ‐15.4% 27.9 20.5 36.6%Other Expenses 28.3 28.6 ‐1.1% 22.5 25.6% 91.5 55.6 64.5%TOTAL EXPENDITURE 385.7 266.7 44.6% 332.8 15.9% 1406.1 831.3 69.1%EBIDTA 12.4 9.8 26.6% 19.7 ‐37.3% 63.9 16.2 294.3%EBIDTA Margin 3.1% 3.5% ‐‐ 5.6% ‐‐ 4.4% 1.9% ‐‐Depreciation 6.8 7.0 ‐2.6% 7.1 ‐3.8% 27.8 21.6 28.9%EBIT 5.6 2.8 100.0% 12.6 ‐56.0% 36.2 ‐5.3 778.6%EBIT Margin 1.4% 1.0% ‐‐ 3.6% ‐‐ 2.5% ‐0.6% ‐‐Interest 11.8 9.5 23.7% 14.6 ‐19.1% 48.7 27.5 77.2%Other Income 2.5 1.4 77.3% 1.0 142.7% 5.8 8.0 ‐27.1%Exceptional Items 0.0 0.0 ‐‐ 0.0 ‐‐ 0.0 0.0 ‐‐Forex Difference 0.0 0.0 ‐‐ 0.0 ‐‐ 0.0 0.0 ‐‐Tax ‐12.3 2.7 ‐‐ 0.0 ‐‐ ‐12.2 2.7 ‐‐Extraordinary Items 0.0 0.0 ‐‐ 0.0 ‐‐ 0.0 0.0 ‐‐Prior period taxes written bk. 0.0 0.0 ‐‐ 0.0 ‐‐ 0.0 0.0 ‐‐Reported Profit After Tax 8.6 ‐8.0 ‐206.7% ‐0.9 ‐1043.9% 5.5 ‐27.5 120.1%PAT Margin 2.2% ‐2.9% ‐‐ ‐0.3% ‐935.9% 0.4% ‐3.2% ‐‐Diluted EPS (`) 0.2 ‐0.2 ‐200.0% 0.0 ‐‐ 0.1 ‐0.6 117.2%

Segmentwise Revenue Breakup Q4 FY15 Q4 FY14 % Change Q3FY15 % Change FY15 FY14 % ChangeTextiles 4.4 5.6 ‐22.1% 3.9 12.3% 18.4 11.3 62.3%Contribution to net sales (%) 1.1% 1.9% ‐‐ 1% ‐‐ 1.3% 1.3% ‐‐Chemicals 384.1 280.1 37.1% 345.0 11.3% 1431.5 824.8 73.5%Contribution to net sales (%) 96.5% 97.1% ‐‐ 97.9% ‐‐ 97.4% 97.3% ‐‐Renewable Energy 2.7 2.7 0.4% 2.0 35.6% 11.4 11.3 0.5%Contribution to net sales (%) 0.7% 0.9% ‐‐ 0.6% ‐‐ 0.8% 1.3% ‐‐Others 6.9 0.0 ‐‐ 1.6 324.5% 8.8 0.0 ‐‐Total Net Sales 398.1 288.4 38.0% 352.5 12.9% 1470.1 847.5 73.5%

Segmentwise Margin Breakup Q4 FY15 Q4 FY14 % Change Q3FY15 % Change FY15 FY14 % ChangeTextiles 0.4 0.3 55.6% 0.3 55.6% 2.6 0.4 591.9%EBIT Margin (%) 9.6% 4.8% ‐‐ 6.9% ‐‐ 13.9% 3.3% ‐‐Chemicals 8.0 18.0 ‐55.5% 18.0 ‐55.5% 51.1 18.6 174.3%EBIT Margin (%) 2.1% 6.4% ‐‐ 5.2% ‐‐ 3.6% 2.3% ‐‐Renewable Energy 1.6 0.9 80.0% 0.9 78.0% 6.9 0.7 861.1%EBIT Margin (%) 59.1% 33.0% ‐‐ 45.0% ‐‐ 60.7% 6.3% ‐‐Others 5.1 1.3 295.3% 1.3 298.4% 6.6 0.0 ‐‐Total Net Sales 15.2 20.5 ‐26.0% 20.5 ‐26.0% 67.2 19.7 240.5%

Standalone Q4FY15 and FY15 Financials (`mn)



FINANCIALS(All data are in ` mn unless specified, Y/e March)

Income Statement FY13 FY14 FY15 FY16E FY17E Balance Sheet FY13 FY14 FY15 FY16E FY17E

Net Operating Income 843.5 847.5 1470.1 1862.9 2585.5 Equity Capital 38.7 51.0 51.0 51.0 51.0

Operating Expenditure 792.4 831.3 1406.1 1716.5 2316.2 Reserves 99.1 136.1 142.0 190.0 319.3

EBIDTA 51.1 16.2 64.0 146.3 269.3 Net Worth 137.8 187.1 193.0 241.0 370.3

Depreciation 11.6 21.6 27.8 27.0 27.9 Loan Funds 215.3 353.0 401.9 437.8 475.3

EBIT 39.5 ‐5.3 36.2 119.4 241.4 Other Long Term Liabilities 0.00 0.00 0.00 0.00 0.00

Other Income 3.7 8.0 5.8 5.6 7.8 Deferred Tax Liab. 20.6 22.5 10.4 10.4 10.4

Interest 15.3 27.5 48.7 54.3 59.0 Minority Interest 0.00 0.00 0.00 0.00 0.00

Exceptional Items 0.0 0.0 0.0 0.0 0.0 Total Liabilities 373.7 562.6 605.3 689.2 856.0

EBT after Exceptional Items 28.0 ‐24.8 ‐6.7 70.6 190.2 Net Block 79.9 420.8 406.7 429.7 401.8

Tax 11.6 2.7 ‐12.2 22.6 60.8 Capital WIP 177.4 0.0 0.0 0.0 0.0

Minority Interest 0.0 0.0 0.0 0.0 0.0 Investment 1.6 1.6 1.6 1.6 1.6

PAT 16.3 ‐27.5 5.5 48.0 129.3 Net Current Assets 114.0 135.5 191.0 248.5 439.7

EPS (`) 0.4 ‐0.5 0.1 0.9 2.5 Total Assets 373.7 562.6 605.3 689.2 856.0

Cash Flow Statement FY13 FY14 FY15E FY16E FY17E Ratios FY13 FY14 FY15 FY16E FY17E

PBT 28.0 ‐24.8 ‐6.7 70.6 190.2 Valuation ratios (x)

P/E 38.0 ‐‐ 147.8 17.0 6.3

P/Cash EPS 22.2 ‐‐ 24.5 10.9 5.2

Net change in WC, Tax, Int 20.9 ‐27.8 ‐44.2 ‐74.6 ‐249.3 P/BV 4.5 4.4 4.2 3.4 2.2

EV/EBIDTA 16.1 71.6 18.9 8.5 4.7

EV/Sales 1.0 1.4 0.8 0.7 0.5

Capital Expenditure ‐71.0 ‐185.1 ‐9.4 ‐50.0 0.0 Earning Ratios (%)

EBIDTAM 6.1% 1.9% 4.4% 7.9% 10.4%

OPM 4.7% ‐0.6% 2.5% 6.4% 9.3%

NPM 1.9% ‐3.2% 0.4% 2.6% 5.0%

ROE 11.8% ‐14.7% 2.9% 19.9% 34.9%

ROCE 11.2% ‐1.0% 6.1% 17.6% 28.5%

B/S Ratios

Current ratio (x) 1.6 1.4 1.6 1.5 1.8

D/E (x) 1.6 1.9 2.1 1.8 1.3

Opening Cash Balance 11.4 11.2 8.3 6.2 15.1 Debtor Days 73.9 85.1 62.2 62.3 63.6

Creditor Days 73.0 96.1 69.9 68.7 66.7

Inventory Days 47.7 57.1 42.9 42.9 43.9

Closing Cash Balance 11.2 8.3 6.2 15.1 21.5 FA/Turnover (x) 10.6 2.0 3.6 4.3 6.4

0.0

0.0

‐21.4

6.3

0.0

86.9

27.7

Investments, Sales of FA, Dividend received and others 1.3 1.3 0.0 0.0

Add: Depreciation, Interest & Other Exppenditure 18.1 39.6

Cash balance of acquired subsidiaries 0.0 0.0 0.0 0.0

Cash flow from Financing Activities 2.5 193.9 ‐18.3 ‐18.5

76.5 81.3

Net Increase/Decrease in Cash & Cash equivalents ‐0.2 ‐2.9 ‐2.0 8.9

Cash Flow from Operating Activities 67.0 ‐13.0 25.6 77.4

Cash flow investing Activities ‐69.7 ‐183.8 ‐9.4 ‐50.0

Standalone Financials (` mn)




Notes: The above analysis and data are based on last available prices and not official closing rates. SKP Research is also available on Bloomberg, Thomson First Call & Investext Myiris, Moneycontrol, Tickerplant and ISI Securities.

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