Bhansali Engineering Polymers - An Import Substitution Story!

(lohiyaakshay08) #82

What abt expansion plan? Approved

(nil_71) #83

(nil_71) #84

It will be great if we get more input from AGM. Hope people from Mumbai will be attending it.

(Agarwala) #85

Great results…
Profit Before Other Inc. , Int., Excpt. Items & Tax jumps to more than 11% of sales for Q ending June 17. Most important question is: in what stages will the capacity expansion be planned? If everything else (cost of production and market value of products) remains stable, after expansion the EPS will be in the range of 10-12 and annual sales above 20000 million. These figures are not impossible… look at INEOS Styrolution India.
The future seems to be unfolding for BEPL.

(nil_71) #86

It will be great if People in Mumbai or those attending it, can share notes from Today’s AGM being held in Mumbai

(lohiyaakshay08) #87

INEOS are in 3segments, ABS being one of them. Are you comparing with the total revenue or only this segment revenue?

(Agarwala) #88

Perhaps, you are referring to my first post dated 13 July. I have mentioned the total revenues of the company (INEOS) and not any particular segment. For FY ending Mar 17, Net Sales/Income from operations: 1,482.35; and Profit Before Other Inc. , Int., Excpt. Items & Tax: 102.33 Crores (6.9 % of sales). The source is Moneycontrol website.
I also recall reading that in case of INEOS the specialty ABS business is lower in comparison to BEPL that may be the reason for lower margins. I will like to add that in case of INEOS the net profit for FY 17 is little less than 70 Crore that will perhaps be the net profit of BEPL for FY 18 on 1000 crore revenue. So the difference in profits (in comparison to sales) becomes glaring. In case of INEOS there is no profit (or revenue) increase visibility in the near future. This seems pretty obvious that during FY 18 BEPL will cross INEOS in every possible financial indicator, except perhaps net worth.

(Nityanand) #89

If there are no short term loans and long term loans then why the company is paying Finance cost? As I can see a Finance cost of Rs 1.11Cr in Jun 17 results.

Has anybody asked this question along with pledged shares in the AGM?

(Anuj Maheshwari) #90

Even i had the same query…i thought this must b more related to LC cost and other bank charges…but this is my assumption. Only 1 thing tht concerns me is high levels of Trade payavles. Almost 50% of raw material cost is payable, something that i believe needs to be clarified

(lohiyaakshay08) #91

Found this floating on social media

(madhavikkutti) #92

One doubt - AGM minutes mention an investment of Rs 300 crores for the capacity expansion from 80 KTPA to 137 KTPA. However, the following Moneycontrol news mentions it to be as Rs. 35 crores: Which one is correct?

(nil_71) #93

Please read Q1 Update to BSE. It is mentioned there 300crs internal accrual only.

(Rajdeep Choudhuri) #94

You are correct. The high Payable days actually has made the cash conversion cycle negative in FY17. It needs to be clarified. Also I see that net fixed assets was reduced by 154 Cr in FY16. Any idea what happened there in FY16?

(Chandragupta) #95

Finance cost includes interest as well as bank charges. Interest costs were incurred for the full year 2016-17 and 2015-16 also, though debt on Balance Sheet is almost Nil. Loans can be taken in-between the two Balance Sheet dates and paid off before the end of the period. In that case, interest costs will be incurred but loans will not appear in the Balance Sheet.

(Chandragupta) #96

Cash Flow from Operations for the last two years have been a little above Rs.50 crores each. Current cash in hand is almost nil (Rs.17 crores of which Rs.15 crores held with banks as margin money). ABS capacity utilization in 2016-17 has been 64%. Even assuming 100% capacity utilization for the year 2017-18, and a big jump in margins, it seems a tall order to finance a Rs.300 crore capex through internal accruals before 31-December-2018. What am I missing here?

(Disclosure: Hold a small tracking position in the company)

(nil_71) #97

You are absolutely true. It seems promoter mentioned that he is going to manage 60-70crs in next 2 -3 qtrs. Rest is needed to see. This Q was raised in AGM. People who attended it, can throw more light on it

(Hardik) #98

Notes from AGM:
(Reproducing what Mr. B M Bhansali discussed in the AGM. Facts to be verified.)

  1. Number of shareholders increased from 11000 to 33000 in last 6 months.

  2. Incurred approx. Rs.50 crores CAPEX for 51 to 80 KTPA expansion. This was done in the same plant by making changes in the reactor and therefore the cost was so low.

  3. For, 80 to 137 KTPA - CAPEX of Rs.300 crores
    Expanding HRG production at Santoor plant from 15 to 35 KTPA and
    Expanding SAN production at Abu Road from 60 to 100 KTPA.
    Simultaneously expanding extrusion capacity at Abu Road from 80 to 137 to manufacture ABS.
    Company already has 145 cr. reserves + Q1FY18 profits
    Need additional 100 -125 crs. which needs to be earned by Dec 2018.

  4. Management is debt averse as they have had bad experience in the past. They do not plan to take any debt either for 80 to 137 or port based 200 KTPA expansion. Therefore, dividend is only 20% and will remain low in future as funds are required for expansion.

  5. On increasing borrowing limits to 1000 crores:
    This is just a formality with Allahabad bank with whom already working capital facility is going on.

  6. 85% capacity utilisation in Q1FY18. Targeting to achieve 95% in coming quarter(s). This quarter may be slow due to GST implementation / administrative issues.

  7. Will cross 1000 crs in FY18. This is partly because excise duty has increased from 12% to GST 18%. It is important to note that BEPL reports revenue on Gross basis while INEOS reports on Net basis.

  8. 200 KTPA expansion - Port based
    Port based will lead to savings of Rs.5-7 per kg.
    It will take atleast 5 years or more to set up, definitely not less.
    Talking to Government of India for land and also working on Technology.
    It takes 18 months for Environmental clearance and Land is still not finalised.
    Hoping to get Land on long term lease (99 years) from GOI.
    Spending 20 Cr. for R&D.

  9. INEOS management has changed 7 times in the past and therefore they are not focused on expansion. Market share is now 50% each in Q1FY18. Eventually, they too will expand.

  10. If MNC player comes with say 500 KTPA then both existing players may face difficulties. But it will take atleast 8-10 years for new player to setup facilities.

  11. China consumes 5000 KTPA whereas we consume about 275 KTPA.

  12. Nippon JV:
    Co. pays 2.5% commission (0.5% royalty to Japan and 2% commission to JV company).
    Improvement in performance is due to JV with Nippon. All special grades are introduced through JV which has resulted in higher sales and profits.

  13. Decides price annually with customers (for 50% turnover with companies like Samsung, LG, Whirlpool. Godrej, Yamaha, Maruti) which is formula based on RM prices. Therefore, margins are stable. Can breakeven at 25% capacity utilisation. Balance 50% is sold in open market.

  14. Co. has 100 grades, 1200 colors and caters to niche and customised market. It’s a very complicated process to produce ABS.

  15. Interest cost:
    This is pertaining to LC opening charges, Buyer’s credit etc. The bank (Allahabad) has earned a lot from company in difficult times and now the company is taking services from bank at concessional rates. Trying to further reduce cost on such transactions.

  16. There is no issue pertaining to power in MP / Rajasthan. There is no plan to have captive power plant at these 2 facilities. There will be power plant, desalination plant, automatic packing facilities at port based plant.

(Chandragupta) #100

Thank you @hardikca for this report.

“Company already has 145 cr. reserves + Q1FY18 profits. Need additional 100 -125 crs. which needs to be earned by Dec 2018” – since the “Reserves & Surplus” figure in the March ‘17 Balance Sheet is Rs.140-odd crores, is he saying only the “remaining” needs to be “earned” to reach Rs.300 crore for the proposed capex? Is he serious?

(blueeyedinvestor) #101

:joy::joy::joy: this is a little illusionary effects. The company have reserves of 140 odd crores and hence need only balance by Dec 2018 to incur 300 cr capex…do they 140 cr cash or liquid investments against such reserves…let’s not get swayed by management words…apply ur own wisdom…

(Hardik) #102

When asked about this, Mr. B. M. Bhansali categorically denied. He said that he and his son (Mr. Jayesh Bhansali) are both very dynamic in nature and they can not do partnerships. They will fund this on their own and without taking any debt. Not sure how will they generate so much funds.