Few points from the con call
Capex will be in Acetic acid, concentrated nitric acid, and formic acid. These will be brownfield expansion over the next 2 to 3 yrs. 1000cr capex. There is also a plan for green field capex on acetic acid which is 1 billion dollar, which is only in the evaluation stage. But man, 1 billion dollar is 6700 crore rupees. I’m not sure if Mr. Parekh wanted to say 1 billion rupees or 1 billion dollars. 6700 crore rupees capex on acetic acid is crazy.
15% stake. Will be online in the mid of 2019. Still 1 yr away for any revenue generation from this project. That may be recognized as revenue or may come in the form of dividend. They are not sure.
Management is guiding that the TDI prices will not soften for the next 1 to 2 yrs. Their reasoning is that the European plants are not operating at full capacity and they frequently go through shut down.( How much of it can be believed, I’m not sure. Convestro con call will give an idea on the TDI pricing). 70 to 80% of the revenue in chemicals may be from TDI. They are planning to decrease this percent over the next 2 yrs. (If TDI prices follow the current trend, this percent will automatically come down, but I hope it comes down the other way by improving other chemicals revenue) Antidumping duty is not applicable to Sadara since they started operating newly after the duty was imposed.
4. Fertilizer business:
No plans to expand fertilizer business. No return on the 1500cr net worth in the fertilizer business. When asked if there is any plan to make GNFC just GNC, i.e. to get rid of the fertilizer and give that to GSFC, and also to offload the stake in GSFC since there is not much interest in expanding the business, the management said that’s for the board to decide. There will be some contingent gains.
5. Neem project:
They don’t want it to be called FMCG, but neem based products section. The revenue from this is 16 to 17cr. They have already started selling the products in more than 6 states.
Overall impression is that the management doesn’t want to give product specific detail (like they usually do) even for Neem products revenue. Someone in the background said the revenue from Neem products was 16cr for Q4, Mr. Parekh wasn’t ready to reveal that too. When the caller asked repeatedly, he revealed 16cr. When asked if that 16cr was revenue or the bottomline, he was not ready to reveal that too. But I assume that 16cr is revenue because if that is bottom line, then the revenue should be over 150cr, which is nowhere nearby the last quarter revenue.
Disc: Exit at 495. Tracking.