Tanfac Industries Ltd - Rs 38.00

Incorporated in 1972, Tanfac Industries Ltd (TIL) is a joint sector company promoted by Tamilnadu Industrial Development Corporation (TIDCO) and Aditya Birla group. TIDCO is still holding 26% stake whereas 25% is held by Aditya Birla group of companies. Today, TIL is one of the largest suppliers of fluorine chemicals in India. It is mainly engaged in the manufacture of inorganic chemicals and fluorine based chemicals such as aluminium fluoride (ALF3), anhydrous hydro fluoric acid (AHF), sodium silico fluoride, ammonium bifluoride, sulphuric acid, potassium fluoride, cryolite and various chemicals. These products have vital applications in industries as varied as aluminium smelting, petroleum refining, refrigerant gases, steel re-rolling, glass, ceramics, sugar, fertilizers, heavy water, etc. Besides it also produces organic fluorides & speciality fine chemicals which are used as intermediates in the manufacture of pharmaceuticals and agrochemicals.

TIL’s manufacturing plant and facilities are spread over 60 acres in the chemical complex of SIPCOT at Cuddalore near Pondicherry. It has technical collaborations with Davy Process (formerly BUSS AG), Switzerland for ALF3 and Chenco, Germany for hydrofluoric acid. Currently, company has an installed capacity of 15600 tpa each for ALF3 & AHF, 75000 tonne for sulphuric acid and 3400 tonne for specialty fluorides. It also has an ISO 9001, 14001, & TPM certification. Being an Aditya Birla group company, Hindalco is its major customer apart from NALCO. Besides, nearly 30% of the production is being exported to countries across the globe. Notably, aluminium industry worldwide has been growing at a fast pace and this has led to a significant improvement in demand for aluminium fluoride. Since 60% of company’s revenue comes from ALF3, this augurs well for TIL.

Financially, company has made a strong turnaround in FY07 with sharp jump in operating margin on back of higher price realization. Its sales grew by 11% to 123 cr but the NP zoomed up 550% to 6.70 cr compared to 1 cr last year. Ironically its OPM improved to 11% against 5% in FY06. Hence it reported an EPS of 7 Rs on equity of 10 cr and declared 15% dividend. Accordingly it can register sales of 130 cr and PAT of 7.75 cr ie EPS of 8 Rs for FY08. Therefore investors can accumulate this scrip at declines as scrip has the potential to give 25 - 30% return in 12 months. Moreover in case Tamilnadu government opts for divesting its stake, the share price can shoot up sharply.