Shree Pushkar Chemicals and Fertilisers ( cmp -117 )

                                                                               

Shree Pushkar Chemicals & Fertilisers Limited (SPCFL) was incorporated as chemical trading company in 1993. Over the years, the company has  diversified into wide range of products in 5 major segment viz. Reactive Dyes, Dye Intermediates, Acid Complex (comprising sulphuric and its derivative acids), Cattle Feed Supplement and Fertilizers (Single Super Phosphate & Soil Conditioner).

SPCFL has created a niche field in the dyestuff business through strong backward and forward integration in its operations which helped the company to manufacture other value added products leading to efficiencies in the cost of production and low dependence on raw materials from external sources. Company is one of the few diversified chemical manufacturers in India with 'zero waste' integrated facilities. SPCFL is an ISO 9001:2008 company and largest manufacturer of K Acid in India with currently two manufacturing facilities located at Lotte Parshuram, Maharashtra.  The company is also a recognized Government Export House.

Product Range

Dyes Intermediate

SPCFL is manufacturing dye intermediates like vinyl sulphone, gamma acid, K-Acid, H-acid and Meta Ureido Aniline. This segment has contributed 71% of total revenue of the company for FY 16. Further  H-Acid and Vinyl Sulphone are the major contributors to the revenue in the dye intermediate segment of business. The company is the largest manufacturer of K-Acid, a dye intermediate used to manufacture Reactive Dyes for dyeing of textiles. The company has an aggregate installed capacity of 8,000 MTPA of various Dyes Intermediates. The company exports its products to the world’s leading dye manufacturers like Huntsman Corporation USA and Archroma Switzerland. In addition to this, the company also exports to several countries like Brazil, Thailand, Mexico etc.

Dyes

SPCFL has started commercial production of different type of reactive dyes from May 2016. Reactive dye is the only class of dyes amongst all the classes of dyes which makes covalent bond with the fiber and becomes a part of it. Dyestuffs are critical inputs to several industries such as textiles, paper & packaging, leather, foodstuffs, polymers, coating etc. Reactive dyes are the absolute best type of dyes made for fabrics or fibers like Cotton, Linen, Rayon, Hemp, Bamboo, Paper, Jute, etc.

Acid Complex

SPCFL  is producing various acids and its derivatives like Sulphuric 98%, Oleum 23%, Oleum 65%, Chloro Sulphonic Acid etc. Most of the acid  production is used for captive consumption and excess quantity is sold in the local market.

FERTILIZERS

SPCFL has commissioned the plant to manufacture NPK and SOP with total capacity 30,000 mt in February and August 2016 respectively. In the fertiliser segment, SPCL has marketing tie up with the DCM Shriram group. SPCL also has its own brand “Dharti Ratna” in the soil conditioner space. SSP is primarily used as a crop nutrient and also find some application in construction, food and pharmaceuticals sector. Soil conditioner is added to soil to improve the soil’s physical qualities such as structure and aeration, water-holding capacity, tile drainage effectiveness, alkali soil reclamation, chemical incorporation, root development, yields and quality.

ANIMAL FEED

Di-Calcium Phosphate is widely used as an additive of feed for livestock and domestic fowls and as supplementary of phosphorus and calcium. SPCFL  is marketing cattle feed with brand name 'Pushp Ahaar'

Key Investment Rationale

SPCFL  has recently expanded its capacity both horizontally and vertically.  Strong backward and forward integration will help to reduce the cost and increase the operational  efficiency. The  forward  integration is to manufacture  dye  stuffs (black,  red,  yellow)  and colorants  from  current  dye  intermediates.  It will help to meet 1,000TPA  long‐term  manufacturing  and supplying arrangement with  Huntsman.    Its  backward integration  at  the  acid  division  followed by  SSP (sulphuric  acid  with  rock  phosphate),  soil conditioner, and  DCP  (acid  waste  with rock phosphate) production. Gypsum  (calcium  sulphate), which  is  a waste product, has  a  realisation  of  Rs 300‐400/tonne. However its conversion  into  soil conditioner (in combination  with magnesium) as a secondary nutrient gives a realisation of Rs 8,000/tonne. Company has set up  500kw  power plant to meet 40%  of  power requirements.

SPCFL has over a period of time treated its main effluents waste prudently thereby inventing new avenues for sales including fertilisers, soil conditioner and cattle feed. The dye  business  results  in  acid  production  along  with significant  waste  but  the company  created  demand for its  by‐products  and  converted  its  wastes  into commercially  viable  products, which  made  it  a  'zero‐waste'  player  thereby improving its operating efficiency. 

There is no listed company which is exactly comparable having a similar business model as that of SPCFL. There are companies like Bhageria Dye Chem, Kiri Industries, Bodal Chemicals are dealing in dye Intermediates. Atul, Aarti Industries, Vinati Organics are dealing in Speciality Chemicals and  Khaitan Chemicals & Fertilizers, Coromandel International, Rama Phosphates are in SSP and soil conditioners business but none of these companies are having similar presence in all 5 verticals  and under integrated facility with 'zero waste'.

Company offers "one stop" source of all their chemical requirements, it has created  large diversified customer base in domestic  like  Vinati  Organics,  Atul,  DCM Shriram,  Meghmani, Amul and Huntsman, Archroma among  international clients. It  has  an  exclusive marketing  arrangement with  Shriram  Chemical  & Fertilizers  for  SSP  in  Maharashtra  and  Karnataka  and has tied  up  with  Shivam  Chemicals  for  marketing  of DCP  in  Karnataka.  It  has  also launched its own soil conditioner brand named Dharti Ratna. with network of 125 dealers.

Location of integrated manufacturing is close proximity to consumption area of product or raw material and to the  ports like Dharamtar, Jaigad and JNPT besides connectivity to road and rail.  This saves time and costs towards transportation, loading and unloading charges and other ancillary charges. Further, it markets cattle feed supplement mainly in the states of Maharashtra and Karnataka while fertilizers are marketed within Maharashtra only. The Company has its own fleet of trucks / tankers for transportation of goods/ acids and thus reducing the dependence on transporters. Dye intermediates are mainly marketed in Maharashtra and Gujarat as both the states are considered to be the major hubs for Dyes manufacturing. This has helped the Company save time and cost towards transportation of raw materials and final products to / from domestic and international customers.

Conclusion

SPCFL has a stable and strong business model with healthy earnings growth visibility after recent commissioning of new production capacities. Strict environmental laws in the several countries have resulted in discontinued production of certain dyes for textiles and leather. SPCFL  has established itself as 'zero waste' chemical and dye manufacturer and it is providing long term sustainable growth opportunity for the company. The organised dyes and dye intermediate industry is expected to grow @ 15 - 20% in coming future.

Management is well determined to capitalize the opportunities and given update during recent investors conference call.

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/AAA868BC_C019_4B68_94B9_9891EC0503E0_144915.pdf

At cmp 118 SPCFL is very good investment option in chemical and dye sector for long term as well as for short term.