MANALI PETRO

Manali Petrochemicals Ltd was promoted by Southern Petrochemicals Industries Corporation (SPIC) in 1986, with promoters' stake being at 44.81 % with remaining shares held by about 1,60,000 shareholders. The two plants of the company are located at Manali , outskirts of Chennai and close to the plants of Chennai Petroleum Corporation from where it sources its major raw material Propylene through a pipeline. Chlorine another major raw-material is sourced from Tamilnadu Petroproducts Ltd., adjacent to its plant, and a group company. Lime, other raw material is sourced from the nearby markets as also imported.
Technical Collaboration :- The company has technical collaboration with ATO Chem (France), Arco (USA), Technip (France) and Montedip (Spain).
Product Profile :- The company has an installed capacity of 35,000 TPA (FY 05 24,000 TPA) of Propylene Oxide , which is used to manufacture 13,250 TPA of Propylene Glycol and 14,000 TPA of Polycol. The company also supplies Methylene Di Iscocyanates (MDI) a complimentary product for the Polyol, by importing it from Japan. Due to over 100 % rise in the prices of MDI in the international markets, and shortage, it posed a serious threat to Polyol users. However , company reformulated the products for use with alternate Iscocyanates and stabilized sales profitability. The company supplies MDI and Polyols to Polyurethane (PU) industry as also provides technical services to user industry. The company is the only producer of Polyols in India which is a highly technology and capital intensive.
PU is a versatile and durable polymer finds use in diverse applications. Flexible PU is used in bedding, carpet underlay, acoustic and mattresses while rigid PU is used for insulation and is widely used in all refrigerators, thermoware, pipe section, panels, engg. components, auto interior trims etc. The moduled variety is used to manufacture auto cushion seats, pillow, bicycle seats etc. Elastomer Grade Polyol is used in the tubeless cycle tyres, rice mill rollers, coatings, sealants, adhesive, shoe sole etc. Polyols is also combined with some supplementary products to produce high margin speciality products.
Propylene glycol is manufactured to IP/USP specifications and finds extensive use in Pharma preparations, food flavours, cigarettes, paints, cosmetics etc. The by-products Di and Tri Propylene Glycol finds extensive use in the resin industry and manufacturing of Fat-G-bricks - an energy conserving building material.
Due to huge demand of the company's products, in various industries, which has great future and good growth, and the company being the monopoly producer in India, can reap benefits by expansion and better margins. The company's plants are presently operating close to or above 100 % of its rated capacity.
Financial Performance FY 05 :- Favourable market conditions , better selling prices, increased sales turnover and high capacity utilization of all plants contributed for vastly improved financial performance for FY 05, which was a year of great turnaround . Gross sales improved to Rs. 309 crores( FY 04 Rs.264 crores) while EBITDA was at Rs.38.66 crores (FY 04 Rs.17.02 crores) . Net profit for the year was at Rs. 23.40 crores ( FY 04 Rs.2.06 crores).
Financial Performance HI - FY 06 :- During six months ending 30.9.05 gross sales was at Rs. 197 crores with EBITDA of Rs. 27.90 crores . The same were at Rs.138 crores and Rs. 9.40 crores for HI of FY 05. Net profit for HI of FY 06 was at Rs. 19.86 crores (Rs.2.17 crores for HI of FY 05).
Financial Restucturing :- The paid up equity of the company as at 31.3.05 was at Rs. 114.70 crores and had a brought forward loss of Rs. 35.33 crores . The company had adjusted the said losses of Rs. 35.33 crores partly by reducing the company's equity by Rs. 28.67 crores and partly from share premium of Rs.6.66 crores. Due to this , the paid up equity of the company will be reduced from Rs. 114.70 crores to 86 crores . This has been made by reducing the face value of the equity from Rs.10 to Rs.7.50. The effect of the same will not result in the market price of the stock or holding of the shares by an investor.
However, due to this restructuring, the company's net worth becomes positive due to which, company would be able to borrow at lower rate of interest as also declaring dividend due to wiping off, of losses. Presently, the company is debt free and this restructuring is being effected to borrow to implement expansion and bio- mass energy project of 5 MW. Of the present debt of Rs. 40 crores , as at 31.3.05 , Rs. 30 crores is interest free sales tax loan while Rs. 10 crores is towards working capital. Gross block of Rs.203 cores is depreciated to the extent of Rs. 145 crores with net block of Rs. 58 crores. However, the replacement cost of the plant is over Rs. 400 crores with equity of just Rs. 86.
FY 06 Performance Projections :- The company is likely to record a sales of Rs. 450 crores, and net profit of Rs. 52 crores resulting in an EPS of Rs.4.50 . However, FY 07 is likely to report a growth of 33 % in topline to Rs. 600 crores and growth of 45 % in its bottomline to Rs. 75 crores translating in an EPS of Rs. 6.50 . The share should rule at a P/E multiple of atleast 8 looking to its product profile, hence can reach a level of Rs. 50 in next 12 months and to Rs. 36 in next six months. The share is presently ruling at Rs.21 which makes it a safe buy for an annualised returns of over 100 per cent in the next one year.
Financial Performance : -
Note :- Equity Capital shall be Rs.86 crores as at 31.3.06, with face value reducing to Rs. 7.50 while no reduction in number of shares