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Vision Organics Limited

Issue Summary

Type Equity Shares on offer 3.6 m
Size Rs 145 m Face Value Rs 10 per share
Offer Price Rs 40 (Rs 10 face value + Rs 30 premium) Pre/Post-issue promoter holding 65%
Minimum subscription 200 shares Promoters Mr. Jatin H. Shah and Mrs. Nayanaben J. Shah
Listing Vadodara, Mumbai and National Stock Exchanges Lead Managers Fedex Securities Limited
Bid/Issue opens 19th Ocotober 2000 Bid/Issue closes 21st October 2000

COMPANY BACKGROUND

BUSINESS

    Vision Organics was incorporated in 1994. The company is presently engaged in the manufacturing of whole range of PVC plasticizers and is one of the largest manufacturers of PVC plasticizers in India.

    The production range of the company is Di Octyl Phthalate (DOP), Di Iso Octyl Phthalate (DIOP), Di Butyl Phthalate (DBP), Tri-Octyl Tri Mellitet (TOTM) and 2ISO Phthalate. The end customers for the company's products are the manufacturers of PVC Rexines, PVC Cables, PVC Pipes, PVC Films and PVC Shoes.

    The company has taken up an expansion project with a view to increase the installed capacity of PVC plasticizers from 21,600 MT per annum to 45,900 MT per annum. The expansion project has been located at Naroli, Silvassa and has already commenced commercial production from FY99.

    The main objectives of the issue are

    • To meet the ongoing capital expenditure of the company
    • To meet the working capital margin
    • To meet the issue expenses

Promoters

    Mr. Jatin H. Shah, aged 41 years, is a postgraduate in Science with Organic Chemistry and has about 16 years experience in the chemical industry. He promoted this company and is its Chairman and Managing Director.

    Mrs. Nayanaben J. Shah, aged 41 years, is an Arts graduate and has about 8 years experience in the administration of the Company. She is also a Director of M/s. Aims Chemicals P. Ltd.

Sector

    The market of PVC plasticizers is directly connected with the market growth of PVC rexins and PVC plastics. At present the demand of PVC plasticizers in India is approx. 1,05,000 MTPA while manufacturing capacities available in India are 1,00,000 MTPA. Plasticizers market is growing at the rate of 8 to 10% per annum.

    The flexible PVC sector is the largest consumer of plasticizers. PVC itself enjoys the largest market share (28%) amongst all the commodity thermoplastics. The present demand of 500 KT of PVC is estimated to reach approximately 820 KT by FY01. Based on a low per capita consumption, a growth of 11-13% on PVC consummations can be projected in India over the next five years.

    The flexible PVC sector accounts for about 41% of the total PVC market. This includes products segments such as wires and cables, calendered sheets, footwear etc. In view of such high growth, it is expected that the plasticizer industry will experience a concomitant increase in demand especially phthalates, considering their wide spread usage both in general purpose as well as special applications.

REASONS TO APPLY

  • The company is presently getting some job work done from outside for which it is incurring job work charges and transportation expenses. With the establishment of the expansion project, the proposed unit will have the same facility on its own and hence it would save these costs substantially.

REASONS NOT TO APPLY

  • The company is presently getting some job work done from outside for which it is incurring job work charges and transportation expenses. With the establishment of the expansion project, the proposed unit will have the same facility on its own and hence it would save these costs substantially.
  • The company would be facing competition from six domestic companies. Besides, import competition can also emerge post WTO. Even at present dumping from China has taken a toll on the bottomline of bulk chemical companies.
  • The contribution from one of the top 5 customers in terms sales has come down from Rs 71 m in FY98 to Rs 52 m in FY00. Besides, contribution from three other customers (among top 5) has also reduced considerably. Though the company has managed to add two new clients in FY00, it has to be seen how it widens its client list.

FINANCIAL PERFORMANCE

(Rs m) FY98 FY99 FY00
Sales 440.0 614.2 777.0
Other Income 3.1 0.5 8.3
Total Income 443.1 614.6 785.3
Expenditure 406.1 537.9 651.7
EBIDTA 37.0 76.8 133.6
GPM (%) 8.4% 12.5% 17.2%
Depreciation 0.7 0.9 4.6
Interest 12.4 39.7 64.4
Profit before tax 23.8 36.2 64.6
Extraordinary item 1.7 - - 0.3
Less: Tax - - -
Net Profit 25.5 36.2 64.3
NPM (%) 5.8% 5.9% 8.3%
Issued shares (m) 6.0 6.0 6.0
EPS (Rs) 4.2 6.0 10.7
P/E (x) 9.4 6.0 10.7

Please note:
* The estimates of financial performance are those provided in the Issue Offer
Document and are not those of www.equitymaster.com.

FUNDING

Where the money comes from...
  (Rs m) (%)
Share capital    
–Promoters 7 2%
–Public 36 11%
Share premium 131 39%
Term loan from bank 68 20%
Internal accruals 66 20%
Unsecured loans and deposits 16 8%
Total 334 100%
Where the money will go...
  (Rs m) (%)
Fixed assets 125 38%
Preliminary, pre-operative and issue expenses 18 5%
Margin for working capital 191 57%
Total 334 100%

SHAREHOLDING

Particulars Pre-Offer Post-Offer
Promoters and Associates 100.0 65.0
NRIs/OCBs - 3.4
Indian mutual funds - 3.3
Indian and multinational financial institutions - 3.3
Public - 25.0
Total 100.0 100.0

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Disclaimer:
We would like to inform our readers that this IPO note is just a one-time view on the company and in no way implies that there will be regular coverage on the company's performance or any other development. Should we decide to bring the company under research coverage in the future, it will be available exclusively to subscribers of the respective subscription.