The fortunes of Tamilnadu-based Chemplast Sanmar changed dramatically in the week gone by as the scrip gained over 65% in just four trading sessions to close at Rs 11.27 on Friday, 25 September ‘09. The commissioning of its longdelayed polyvinyl chloride project brought the market’s fancy back to the company, which had incurred heavy losses in FY09 - first time in its over 40 years of history - wiping out more than three years of profits. On Tuesday, 22 September ‘09, the company announced the completion of its 170,000-tonne per annum polyvinyl chloride (PVC) plant at Cuddalore at a capital cost of Rs 600 crore, which will more than triple its PVC capacity from the existing 65,000 tpa. At the current market prices of PVC, this plant can generate revenues of Rs 850 crore on an annualised basis. Chemplast’s first PVC plant, running now for 42 years, is the only one of its kind in India using molasses or alcohol to produce ethylene. The company suffered in FY09 from high prices of molasses and alcohol due to a fall in sugar production. As against this, the new plant will produce PVC from imported vinyl chloride monomer (VCM). Chemplast is also expanding its capacity to manufacture PVC pipes, which contributed nearly 11% of its revenues in FY09. The company set up its third pipe plant in Maharashtra with 22,000-tpa capacity in December ‘08. The company ended FY09 with its debt at Rs 1,244 crore, nearly 6.7 times its shareholder funds of Rs 186 crore. However, the company made a rights issue of shares in April ‘09, raising Rs 160 crore, which brought down the debtequity ratio to 3.6. Fitch downgraded the company’s debt by one notch in July ‘09 to BBBgrade. The current capacity expansion is sure to bring in substantial additional revenues and boost profits. However, the high leverage and associated interest burden continues to remain a major concern.
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