X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Tata Chem: Fighting all odds - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jun 8, 2002

    Tata Chem: Fighting all odds

    An across the board rejuvenation exercise undertaken by Tata Chemicals recently seems to be yielding results. The company has already achieved considerable success in its efforts to cut costs on both macro and micro front. The stage seems set for the company to become a globally competitive player in the soda ash business. This seems to be a big leap for the company as the industry, has hitherto survived primarily due to domestic tariff protection.

    The progress and strategy of the company in each of its core business is outlined below.

    Soda Ash
    The scenario for the soda ash industry continues to be challenging. The demand supply mismatch continues and the current reduction in import duty to 20% has come as a blow to the industry. However, on the positive side, global prices have firmed up and are expected to remain stable negating the impact of duty reduction. Within the demand segment, capacity expansion in domestic glass manufacturing is expected to improve demand situation.

    Tata chemicals has been able to prune US $ 10 per tonne of cost and is targeting similar reduction over the next two years. The company is re-organizing every aspect of the business to increase efficiency and has set for itself a target to become the lowest cost synthetic soda ash producer in the world over the next two years.

    Salt
    Tata Salt has been a pioneer in the branded edible salt segment with highest market share. However, HLL’s ‘Annapurna’ brand and some new brands like ‘Dandi’ are keeping the company on its toes. After a short slip in market share, the company has regained its market share in the branded salt business. The opportunity in salt business is to capture a large chunk of un-branded market, which is still a giant 73% of the total market size. Branded salt market itself is expected to grow at 4-5% p.a.

    As part of its strategy to improve profitability and expand business, the company is also evaluating various export opportunities. The export market of vacuum salt is lucrative with international salt prices ranging up to US$ 1/kg as compared to US$ 0.2/kg in the domestic market. Tata Chemicals has already started exports to Middle East countries and plans to further explore South East Asian Countries.

    Fertilizers
    Tata Chemicals is one of the most efficient producers of urea in the world. The outlook for fertilizers remains good for the company as it expects to benefit from the prospective de-control due to operational efficiencies and superior margins. The company’s urea plants enjoy feed stock flexibility and location advantage. The company has one of the most efficient distribution networks backed by marketing alliance with Rallis, an acknowledged leader in agri-product distribution in the country. The company plans to expand into high margin potassium and phosphorus based fertilizers and also expands its geographical presence.

    Read our recent interview with Mr. Prasad Menon, MD, Tata Chemicals.

    Tata Chemicals plans to unlock value from all non-core businesses as soon as possible. The company has already exited detergents business. A decision on the divestment of its cement business with a clinker capacity of 0.32 m tonnes is also expected soon. Amongst other cost reduction measures, the company has restructured its loan portfolio, bringing down interest cost to around 12% from a peak of around 18%. Besides, it has initiated various measures for improving working capital efficiencies.

    In the absence of major expansion plans, the company has robust cash flows every year. Apart from this the company also has Rs 4.3 bn in investments (which is equal to 50% of the company’s current market capitalization). Most of these investments are either liquid or invested in Tata group companies, which could unlock considerable value going forward.

    However, with this substantial amount of money blocked in investments, the company’s RoCE is impacted considerably. The RoCE of the company has dropped from almost 15% in 97-98 to mere 7% expected for FY02. To counter this situation, the company has initiated a major buyback program. The company has allotted Rs 1.3 bn for its buyback program, which would be through the open market route at a maximum price of Rs 60 per share. At the current market price of Rs 47, this translates into a buyback of 27m shares (15% of its total outstanding shares).

    The company looks attractive given the future roadmap drawn by the company and more so with a dividend yield of 11%. However, one should keep in mind that commodity business is prone to business cycles and the threat of international dumping (especially with custom duties sloping downwards) remains. Further, the future fertilizer scenario in the country still remains unclear and even the most efficient players are at the mercy of the government.

     

     

    Equitymaster requests your view! Post a comment on "Tata Chem: Fighting all odds ". Click here!

      
     

    More Views on News

    Tata Chem: Suspension of Haldia Operations Drag Bottomline Lower (Quarterly Results Update - Detailed)

    Aug 17, 2017

    Interruption at Haldia plant and fire at Lostock facility hits operations during the quarter.

    Tata Chemicals: Lower Finance Costs Boost Profits (Quarterly Results Update - Detailed)

    Jun 2, 2017

    Tata Chemicals registers 54.2% YoY rise in net profits during fourth quarter of FY17 on the back of lower finance costs and rise in other income.

    Tata Chemicals: Urea division dampens performance (Quarterly Results Update - Detailed)

    Nov 18, 2016

    Tata Chemicals has reported consolidated topline fall of 17% YoY while the bottomline has fallen 5% YoY

    Tata Chemicals: Operating margins catalyze strong profit growth (Quarterly Results Update - Detailed)

    Aug 18, 2016

    Tata Chemicals has reported consolidated topline fall of 9% YoY while the bottomline has grown 40% YoY.

    Tata Chemicals: Ends the year on a good note (Quarterly Results Update - Detailed)

    Jun 8, 2016

    Tata Chemicals reported consolidated topline growth of 7% YoY while the bottom line stood at Rs 2.4 bn as opposed to a loss during same quarter last year.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    TATA CHEMICALS SHARE PRICE


    Aug 23, 2017 12:23 PM

    TRACK TATA CHEMICALS

    • Track your investment in TATA CHEMICALS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    MORE ON TATA CHEMICALS

    TATA CHEMICALS 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE TATA CHEMICALS WITH

    MARKET STATS