Pondy Oxides & Chemicals Ltd - 20.00 Rs
Incorporated in 1995, Pondy Oxides & Chemicals Ltd (POCL) is one of the India's leading integrated metallic oxides and plastic additives producers. It basically manufactures zinc oxide, litharge (Lead monoxide), grey oxide (lead sub oxide) red lead and solid/liquid stabilizers of PVC. Metallic Oxides are largely used in the battery industries and the automobile sector whereas plastic additives are primarily used for the manufacture of PVC stabilizers. POCL has even promoted a subsidiary company by the name M/s Baschem Pharma Ltd to manufacture liquid stabilizers epoxy oil and paint driers. Besides, it also has a facility for manufacture of Lead acid batteries which manufactures stationery batteries, used for uninterrupted power supply (UPS), inverters, emergency lamps, photovoltaic batteries, and automobile batteries. But recently company has decided to dispose-off the same, so that it can concentrate on its core business. Importantly, POCL boasts of being an integrated producer with in-house production facility of Lead metal for captive consumption.
POCL’s has four manufacturing plants spread across Pondichery & Tamilnadu with an installed capacity of 4680 MT for lead sub oxide, 2880 MT for zinc oxide, 1800 Mt for litharge & 360 MT for red lead. To sum up, it has the capability to produce 9720 MT of metallic oxides and 4200 MT of PVC stabilizers. In addition it has a name plate capacity to manufacture 96,000 units of lead acid batteries at its Madurantagam plant which company is looking to sell it off. Incidentally, lead is the major raw material for production of metallic oxides followed by zinc. Hence in order to reduce its dependence on suppliers and ensure regular and economical supply, POCL, in late 2006 got itself backward integrated to manufacture lead and lead compounds. It has established a state-of-the-art manufacturing plant with a rated capacity of 14,4000 MT for lead and lead alloys and another 3600 MT for lead compounds. So, company is even engaged in the process of smelting, refining and alloying of lead metal and specializes in the process to manufacture lead alloys like, lead tin calcium, lead tin, lead selenium alloy, lead antimony selenium alloy and others, which find their use in the battery industry for grid casting for lead-acid batteries. Meanwhile, POCL is also looking to venture into manufacture of refined Zinc and the project is under consideration. Another significant step, recently finalized by the company is acquiring 51% stake in M/s. Lohia Metals Pvt Ltd with an investment of around Rs 2.25 cr and thereby making it a subsidiary of the company. Lohia Metals, managed by one of the Bansal family member is an associate company with a turnover of roughly around Rs 25~30 and is engaged in the process of refining and alloying of lead metal with an installed capacity of 12,000 MT.
In August 2006, to fund its backward integration project, POCL had raised Rs.7.35 cr through the right issue in the ratio of 2:3 @ Rs 4/- per share when the face value was Rs 2/- per share. Subsequently company also gave 1:10 bonus and the later on consolidated all the equity shares on 20.01.07 from the face value of Rs.2/- to Rs.10/-. Due to better capacity utilization of the lead smelter and higher price realization for metallic oxides, company’s sales shot up 60% to Rs 170 cr and NP jumped up 55% to Rs 4.50 cr for FY08. It is expected to announce 15% dividend which will give a yield of mind boggling 7.5% at CMP. With robust metallic oxide prices and being an integrated producer as far as lead is concerned, POCL is expected to lock a turnover of Rs 200 cr and PAT of Rs 5 cr for FY09 i.e. EPS of Rs 5 on equity of Rs 10 cr. So despite low profit margin & low promoter holding, investors can buy at current levels as it can give 50% return in 12~15 months.
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