Aarti Industries - Rs.90.00

Aarti Industries Ltd (AIL) was originally incorporated in 1984 as Aarti Organics Ltd and was later merged with Salvigor Laboratories in 1997 to form AIL. Today it has acquired world-class expertise in the development and manufacture of basic bulk chemicals, dyes & intermediates, agrochemicals & intermediates, rubber chemicals, surfactant intermediates and speciality chemicals. AIL is among the largest producers of Benzene based basic and intermediate chemicals in India. The company derives economies of scale from its large installed capacities for nitro and chloro-benzene derivatives and makes a wide range of value-added downstream products. Under its inorganic acid division, it manufactures sulphuric acid and its derivatives. Its exports to more than 65 countries including USA, UK, Germany, Spain, Italy, Switzerland, Belgium, Japan, Korea, China, Russia, etc. It also has representatives in USA and a subsidiary company in UK to provide better services to its overseas customers

AIL has manufacturing plants at Vapi, Sarigam & Jhagadia in Gujarat and at Tarapur & Dombivli in Maharashtra. Almost all its plants are WHO GMP approved. Recognizing the importance of research, the company has established three full-fledged DSIR (Dept. of Scientific & Industrial Research)-Government of India recognized R & D centres, which carry innovative products and process development work. It is also setting up a new plant at Tarapur and a Customised Synthesis plant at Vapi to manufacture speciality chemicals & APIs for which USFDA approvals would be obtained by FY06. With the implementation of the product patent require in India, custom synthesis has become one of the big growth areas. It is also looking at marketing tie-ups with multinational generic companies. Besides AIL commissioned its sulphuric acid expansion project and a 6 MW captive power generation plant last fiscal and is expanding its nitro-chloro-benzene facilities. Recently, it has approved to merge its subsidiaries Avinash Drugs and Aarti Healthcare which is engaged in manufacturing of Active pharma ingredients in niche segments Viz: Anti – Hypertensive, Anti –Asthamatic, Anti-Cancer, Anti- Inflammatory / Anti- Allergic, Anti- Diabetic, Anti- Depressants, Anti- Thalassaemic.

Going by its dividend track record and bonus announcements, AIL appears to be an investor-friendly company. It has just completed its second bonus issue of 2:1(two shares for one share held), taking the equity base to Rs.36.39 cr. For the nine months ending 31st Dec’04, it reported a topline growth of 32% to Rs.507 cr. and the NP increased by 22% to Rs.37 cr. However its OPM decreased to 14% from 16% due to higher input costs and crude oil still remains a concern. Yet, it can post a turnover of Rs.660 cr. with NP of Rs.48 cr. This will work out to an EPS of Rs.13, which discounts the current market price by 7 times. Considering the company’s future plans & growth prospects investors can expect 50% return in 15 months from the scrip.