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IPCL: Back on track

May 30, 2001

Indian Petrochemicals Corporation Ltd. (IPCL) has registered an impressive topline growth for FY01. This is mainly due to the strong growth in the first three quarters of FY01. In 4QFY01, sales have declined marginally.

(Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
Sales 13,693 13,096 -4.4% 40,600 50,060 23.3%
Other Income 478 786 64.4% 1,121 1,677 49.6%
Expenditure 11,115 10,493 -5.6% 32,685 39,958 22.3%
Operating Profit (EBDIT) 2,578 2,603 1.0% 7,916 10,102 27.6%
Operating Profit Margin (%) 18.8% 19.9%   19.5% 20.2%  
Interest 1,399 1,122 -19.8% 3,876 4,910 26.7%
Depreciation 816 1,044 27.9% 3,190 4,149 30.1%
Profit before Tax 841 1,223 45.4% 1,972 2,720 38.0%
Tax 83 231   83 231  
Profit after Tax/(Loss) 758 992 30.9% 1,889 2,489 31.8%
Net profit margin (%) 5.5% 7.6%   4.7% 5.0%  
No. of Shares (eoy) 249 249   249 249  
Earnings per share* 12.2 15.9   7.6 10.0  
P/E Ratio   3.8     6.1  
(*annualised)            

The improvement in sales is attributed to higher volumes and better realisations. The production of the company increased by 15% to 1.4 MMTPA from 1.2 MMTPA. Volume sales grew by 18% and were higher than production by 82,000 MT. The company has set a revenue target of Rs 64 bn for FY02.

The turnover growth has positively impacted operating profit growth. Also, the company has maintained vigil over costs. IPCL has attempted to streamline its supply chain to gain greater operating efficiencies. Transportation and storage costs have been brought under the magnifying glass to control marketing expenses. Consequently, the OPM has increased by 70 basis points in FY01 despite adverse market conditions.

The meteoric rise in oil prices in FY01 led to a significant jump in petrochemical feedstock prices, both naphtha and natural gas. The higher raw material costs applied downward pressure on the OPM. The company's new plants at Gandhar and Nagothane operate on natural gas. However, the company has done well to overcome these external challenges. An operating rate of 90% was achieved by the company.

The effective tax of the company has doubled from 4.2% to 8.5%. The company has made a strong comeback in the last two years after witnessing declining profits in FY97, FY98 and FY99. At Rs 60.8 the company trades on a multiple of 6.1x FY01 earnings. The valuations of the company over the last three years are skewed by the disinvestment expectations. However, prior to the disinvestment news the company attracted an average multiple of 8.3x.


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