Balaji Amines Ltd - Rs 105.00

Balaji Amines Ltd (BAL) was setup in 1988 for manufacturing of aliphatic amines in India to cater the growing requirements of value based specialty chemicals. Since then, it has emerged as the leading producer of methylamines, ethylamines and their derivatives. Importantly, BAL is among the few handful manufacturers across the world as amine manufacturing technology is a closely guarded process. And ironically company is using indigenously developed technology i.e. without any technical foreign collaboration. And remarkably, its one of the lowest cost producers of methylamines in the world. Today, it also produces specialty chemicals which are import substitutes like Morpholine, hydroxylamine, N-Methyl Pyrrolidone (NMP) etc and few natural products (herbal extracts) such as solanesol, calcium sennosoid, coleus forskohlii, camptothesin, Co-Enzyme Q-10, Tocopherols, Tocotrienols & SoyIsoflavones etc. Company’s products find application in various important industries including like pharmaceuticals, agro chemicals, water treatment, rubber chemicals, dyes & pigment, paper, explosives, rocket fuel oil refineries, photography etc. Besides, Morpholine - which is being manufactured by company for the first time in India through indigenously developed technology, finds extensive application in manufacture of corrosion protection compounds used in refineries, ships, steel plants etc. Being ISO 9001-2000 certified, company’s product are very well accepted in international market and it derives more than 20% of total revenue from export to several countries such as UK, USA, Canada, Latin America, Germany, Italy, Middle East, South Africa, France, Brazil, Mexico etc

BAL has two manufacturing facilities - one at Sholapur-Maharashtra for amines & derivatives and second one at Hyderabad – AP for natural products. Recently it has set up a third unit in Chincholi-Solapur, for production of Gamma Butyro Lactone (GBL), a raw material for manufacture of NPM with a name plate capacity of ~6500 TPA. With the commencement of this plant in July 2009, now BAL has, not to depend on import of GBL as its requirement can be fully met from captive production. This would reduce the cost of production of NMP and also enhance the product range to serve the domestic and export market. Interestingly, this GBL plant is first of its kind in India and is a 100% import substitute. Moreover, company has developed the manufacturing process in-house thru R&D with catalytic dehydrogenation. The hydrogen produced by dehydrogenation is further being utilized, for the first time in India for running the boilers. On the other hand due to constant expansion, company boast of having total combined installed capacity of 50,500 TPA for aliphatic amines and derivatives of amines. Against this company is working at less than 80% capacity utilization. It has strong presence in domestic market with major clients from pharma sector including Aurobindo, Aventis, Clariant, Dr. Reddy’s, Glaxo, Merck, Ranbaxy, Sun Pharma, Wyeth, Wockhardt, etc. Earlier it also entered into a long term strategic arrangement with BASF for supply of NMP. Notably, company is the only manufacturer for Morpholine and NMP with a monopoly status in India and hence, has set up a separate dedicated plant at Solapur to manufacture them.

Meantime, for future growth BAL is setting up Poly Vinyl Pyrrolidone (PVP) plant at Chincholi, Solapur, which will be again the first in India. Simultaneously it is also setting up 2.5 MW co-generation power plant at Tamalwadi, Solapur. Last fiscal it started power generation through windmill by establishing 1.5 MW windmill at Satara, Maharashtra. Further, it has always been the company's endeavour to continuously seek knowledge into newer products and technologies. It boasts of having two state-of-the-art R&D centers at both its plants. The R&D initiatives undertaken over the years have been one of the largest contributories in making the company a major player in speciality chemicals. Infact, for FY09 it has spent more than 5% of its revenue for R&D. Thus because of its strategic backward & forward integration, BAL has been able to maintain its status of one of the lowest cost producers.

Financially, company has been reporting very encouraging nos as sales has grown at a CAGR of 25% and PAT at a CAGR of 35% for the last five years. For FY09, its sales improved by 15% to Rs 252 cr and profit increased by 20% to Rs 15 cr. Thus it posted an EPS of Rs 24 on equity of Rs 6.50 cr. Incidentally, company is negatively impacted by the depreciating rupee as it imports lot of raw material, although to a great extent it gets mitigated due to exports. Most importantly, despite such volatility in raw material prices based on crude, BAL has been successful in maintaining a more or less stable operating margin. Even for Q1FY10 its PAT remained flat at Rs 5 cr despite reporting nearly 25% fall in sales. Accordingly for FY10 it may clock a turnover of Rs 250 cr and net profit of Rs 17 cr i.e. EPS of Rs 26 on current equity. At a modest discounting by 6x times, the share price can shoot up Rs 160 within 12~15 months. Investors are advised to buy keep accumulating at declines.

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