Oct 12, 2000|
Indo Gulf : Valuation 'Blues'
Indo Gulf Corporation, a part of the Aditya Birla group, is engaged in the manufacture of ammonia and urea. The company has also diversified into manufacture of copper. It is also one of the co-promoters of the AT&T Birla Telecom JV which has received licences to operate cellular services in Maharashtra (except Mumbai) and Gujarat. The company has however indicated that urea and copper will be the main focus in the future.
The current year is a tough year for urea manufacturers. (This division contributed 27% to the company’s turnover in FY00). Besides, there is uncertainty about the government policy with regard to the retention pricing scheme in the current year. This is accompanied by the fact that opening up of imports post April 2001 is likely to put pressure on the domestic fertiliser manufacturers in the coming year.
The company’s diversification into copper two years back has helped the company to stabilise its earnings. FY99 marked the commissioning of Indo Gulf`s 100,000 tpa copper smelter at Dahej, Gujarat. The plant was set up in only 28 months at a cost of Rs 18.5 bn. The copper division - Birla Copper achieved 100% capacity utilisation within 11 months of its trial runs and has emerged as the market leader in the domestic copper industry. This division accounted for 64% of revenues in FY00. At the end of the fourth quarter of FY00, the company had 48% share of the domestic market. The steady prices of copper in the first quarter of the current year has helped Indo Gulf a 6.3% increase in net profits in the first quarter. With the jelly filled telecom cables (these account for 40% of the copper cathode rods consumption) demand expected to grow further in the current year too, this division is in for good times.
In the current year the company is in the process of setting up a precious metal refinery which will refine gold and silver from the anode slime generated by the copper plant for sale in the domestic market. In addition the company is blending synergies of copper and fertilisers together by setting up a 400,000 tpa Di–Ammonium phosphate plant. The unit, which is slated to go on stream in October will utilise the phosphoric acid generated by the company.
The stock quotes at Rs 32 which implies an earnings multiple of less than 3 times its FY01 earnings. A very heavy price to pay for being considered a part of the old economy!
More Views on News
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.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
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: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407