TATA CHEMICALS

Tata Chemicals (TC), established in 1939, is one of the leading manufacturers of inorganic chemicals and fertilisers in India. Part of the Tata Group, the company owns and operates the largest and most integrated inorganic chemical complex in the country.It also runs a fertiliser project that has won many awards for energy conservation, productivity and safety. The chemical complex is in Mithapur, Gujarat, and the fertiliser division is located in Babrala, Uttar Pradesh.The company also operates a salt works spread over 60 sq km and capable of generating over 2 million tonnes of solar salt, the raw material for the 27 basic chemicals that it produces. With a capacity of 875000 tonnes Tata Chemicals (TC) is the market leader in the Soda Ash segment, accounting for 30% market share. Revenues from this segment account for 51% of inorganic chemicals sales and 20% of overall sales. Being the market leader in this segment and taking into account its organic and in-organic expansion plans we expect TC to be the prime beneficiary of the upturn being witnessed in the industry.The per-hectare consumption of fertilizers in India is at 98 kg per hectare, this is lower compared to even countries like Pakistan and Bangladesh. Added to this the total land area under cultivation is presently saturated at 143 million hectares making fertilisers the only option towards raising productivity. As per the ministry of fertilizers, fertilizer consumption is expected to grow at 10% annually. Taking into account the capacity expansion plans of the company we expect the performance of the company to get better in the medium to long term.The size of Indian salt industry is pegged at 131 lakh MT, 87% of this is accounted by domestic demand with the balance being contributed by exports. Of this edible salt accounts for around 53 lakh MT. Branded salt accounts for 27% of the edible salt market. Tata salt is a leader in the branded market with a share of 39%. In the Economic Tines Brand Equity survey Tata Salt was ranked number one among food brands. Despite heavy competition in the branded segment, TC with its unique advantage would be expected to do well.Added to this its additional products, like Cement, Sodium Tripolyphosphate, etc is also expected to contribute to the growth of the company. The stock is quoting at 14X its FY06E
Taking into effect the positive industrial environment and the capacity expansion to be undertaken by the company, investments can be considered with a LONG TERM PRESPECTIVE