Co’s consistent history of positive cash flows may help it bring down debt
Specialty chemicals maker Balaji Amines is investing heavily in higher capacities and new products. All these projects will be operational in phases next year and add to the company’s FY13 earnings. The company should, however, ensure that the rising debt burden and interest costs do not weigh on its performance.
Balaji Amines is India’s largest producer of specialty chemicals ethyl and methylamines and their derivatives. A shortage in the global market leading to a price rise in its main product boosted the company’s September ’11 quarter profit margin to 20.1% — the best in the past two years. Its net profit at . 10.6 crore was the best ever for any quarter.
At present, the company is tripling the capacity of its methylamines plant and adding two derivative products at a capital cost of . 60 crore. These three units will commission between January and July of 2012. The company will become the biggest producers in India of the two derivatives — dimethyl formamide and dimethyl hydrochloride — and replace current imports. Balaji Amines is also setting up a 100-room 5-star hotel on its land in Solapur with . 50 crore of capex to be completed by end 2012.
The company’s expanded capacity of specialty chemical NMP remained under-utilised in the first half of FY12 due to raw material shortage. It expects approvals from USFDA and EU authorities for its product PVPK 30, which is used as a binder in tablets. The approval and better utilisation of NMP plant will also add to FY13 revenues and profits.
While the company pursues aggressive growth options, it needs to mind its debt burden. The company ended September ’11 quarter with a debt of . 158.6 crore and debt-equity ratio near 1. Its interest burden in the first half of FY12 at . 9.8 crore was up 78% against the year ago period. The company will be funding the ongoing capex of . 110 crore with . 73 crore of debt, which will increase its debt pile. However, it has a consistent history of positive cashflows from operations, which will be key in paying down the burden in future.
In the past one year, the scrip has fallen around 6% against a 15% drop in the BSE Sensex. It is currently valued at 4.3 times its earnings for the past 12 months with a beta of 0.65, indicating less volatility as compared to Sensex.
Balaji Amines is India’s largest producer of specialty chemicals ethyl and methylamines and their derivatives. A shortage in the global market leading to a price rise in its main product boosted the company’s September ’11 quarter profit margin to 20.1% — the best in the past two years. Its net profit at . 10.6 crore was the best ever for any quarter.
At present, the company is tripling the capacity of its methylamines plant and adding two derivative products at a capital cost of . 60 crore. These three units will commission between January and July of 2012. The company will become the biggest producers in India of the two derivatives — dimethyl formamide and dimethyl hydrochloride — and replace current imports. Balaji Amines is also setting up a 100-room 5-star hotel on its land in Solapur with . 50 crore of capex to be completed by end 2012.
The company’s expanded capacity of specialty chemical NMP remained under-utilised in the first half of FY12 due to raw material shortage. It expects approvals from USFDA and EU authorities for its product PVPK 30, which is used as a binder in tablets. The approval and better utilisation of NMP plant will also add to FY13 revenues and profits.
While the company pursues aggressive growth options, it needs to mind its debt burden. The company ended September ’11 quarter with a debt of . 158.6 crore and debt-equity ratio near 1. Its interest burden in the first half of FY12 at . 9.8 crore was up 78% against the year ago period. The company will be funding the ongoing capex of . 110 crore with . 73 crore of debt, which will increase its debt pile. However, it has a consistent history of positive cashflows from operations, which will be key in paying down the burden in future.
In the past one year, the scrip has fallen around 6% against a 15% drop in the BSE Sensex. It is currently valued at 4.3 times its earnings for the past 12 months with a beta of 0.65, indicating less volatility as compared to Sensex.
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