Liberty Phosphate - Rs.21.00

Established in 1977, Liberty Phosphate Ltd (LPL) is the flagship company of the Liberty Group engaged in manufacturing Single Super Phophate (SSP) and NPK fertilizers. SSP, known as the poor farmer's fertilizer - price-wise, is a straight phosphatic multi-nutrient fertilizer that helps treat sulphur deficiency in soils (40% Indian soil is sulphur deficient) as well as enhance yields at the least cost. In various crops, which require more of sulphur and phosphate like oilseeds, pulses, sugarcane, fruits & vegetables, tea etc, SSP is an essential fertilizer. LPL is the largest manufacture of SSP commanding more than 14% market share and the Liberty Group including group companies Liberty Urvarak and Tungabhadra Fertilizers cater to 18% of the SSP fertilizer demand in the country. Its ‘Double Horse’ brand is very popular among farmers and is said to have the having highest sale in India.

The group has six manufacturing units situated in different parts of the country. The plants at Udaipur & Kota in Rajasthan, Baroda in Gujarat, Pali in Maharashtra belong to LPL whereas the plants at Nimrani in MP & Hospet in Karnataka is under Liberty Urvarak and Tungabhadra Fertlizers respectively. Because of its multi-locational establishment, the company has the advantage of viable cost-effective manufacturing and marketing to reach farmers even in the interiors of the country. Presently, the group has a manufacturing capacity of 7,25,000 MTPA of SSP fertilizer and 1,65,000 MTPA of NPK. Due to the strong demand and popularity of its brand and product, the company is planning to put-up new projects in other states like UP, Haryana and Central MP by 2007 and thereby increase its production capacity to 10,00,000 MTPA. It is also considering to establish a SSP plant at Visakappatnum with capacity of 1,32,000 MTPA to fulfill the demand of farmers of southern India. By various initiatives, the group will establish 4-5 mobile laboratories for testing fertilizer/soil for the farmers of Rajasthan, Gujarat and M.P. The group has also created a separate budget to adopt 45 villages for its product promotional activities.

To fund its growth plan, the company is raising around Rs.5 cr. through preference shares and Rs.5 cr. through equity shares by private placement of 20 lakh equity shares at Rs.25 per share. Earlier it had planned to raise money through a rights issue but cancelled. Incidentally, LPL is also planning to merge its other two group companies with itself, which will consolidate its position and will lead to economies of scale to some extent. For FY06, its sales increased by nearly 20% to Rs.87 cr. whereas net profit jumped 55% to Rs.2.60 cr. yielding an EPS of Rs.6. For the June’06 quarter, also, its sales almost doubled to Rs.36 cr. and net profit increased by 50% to Rs.1.50 cr. Hence for the full year FY07, it is estimated to clock a turnover of Rs.125 cr. with net profit of Rs.3.25 cr. This works out to an EPS of Rs.8 on its current equity of Rs.4.13 cr. and Rs.5 on its diluted equity of Rs.6.13 cr. Investors are recommended to buy the stock at current levels as the scrip can easily appreciate 50% in a 12¬15 months.