ValuePickr Forum

TGV SRAAC erstwhile Sree Rayalseema Alkali

(Harshit Goel) #21

Interview of Gujarat Alkalies’s MD on Caustic Soda prices was done on CNBC today morning. Following are the key points from the interview.

  • Caustic Soda Flakes are priced at around 38000-40000 per tonne.
  • Caustic Soda Lyes are priced at around 33000 per tonne.
  • Margins on Caustic Soda are around 20%.
  • Most of the Caustic Soda in India is used in Lye form. Flakes are used majorly for exports or for any specific purpose.
  • Prices are flat for some time now and expect them to remain at current levels.
  • Prices rallied a lot in Q4FY18, that kind of rally is difficult to come back.

Regards
Harshit

(HIMSHAH) #22

Tgv is doubling capacity of caustic and chloromethene … chloro has very good demand in Pharma company and they are in plenty in Hyderabad

(HIMSHAH) #23

Very good result by TGV SRAAC. They have shown very good results. It’s improving quarter by quarter. This quarter they have shown around 30 cr profit( 17 cr + 12 cr extra one time int charges) on 91 cr capital.
I have personally visited their plant in last AGM and look very good script to invest.
I Request other member to do FA aNd TA of the tgv.
Their recent expansion to chloromethene is very profitable. And in our forum some member has posted environmental clearance report which suggest that company is doubling capacity of caustic and chloromethene

(HIMSHAH) #24

Interesting part is market cap is 350 cr for company with turnover of 1300 cr . Expected earning 17 cr + 30 cr + 30+ 30 cr assuming same earning in rest two quarter ei 107 cr + 50 cr depreciation so company earning 157 cr a year on 90 cr capital.

(HIMSHAH) #25

Promotor going for preference shares a good move and shows confidence in company

(HIMSHAH) #26

Promotor raising stake at 37. Infusing 52 cr in company. They are plannng to double the capacity so this capital infused

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(HIMSHAH) #27

Worth to have a look. Company is on sound foot.

(HIMSHAH) #28

i have just attended TGV SRAAC EGM and following are points to keep in mind for the company …

i am not that good in narration so will keep it point wise
caustic soda …

  1. they increased capacity from 171658 mt to 259150 mt.and now they are planning to increase from 650 ton per day to 800 ton by sept 2019 and 1000 ton by march 2020. total approx capex is around 200 cr.
  2. they are upgrading caustic memberane tech to zero gap tech wich increases production and efficiency…
    ( i checked guj flouro annual report for refrence and they have done it ). it will reduce cost of production.
    they are third largest producer of caustic in india.caustic runnung at nearly 90 % capacity.

Methylene Chloride & chloroform

  1. they have installed capacity of 51890 M ton wich they are planning to increase to 103780 M ton. and it will have capex of around 140 cr. it will be operational by april 2020.the GUJ FLUORO are the largest producer of chloro with installed capacity of around 105000 MT and production of around 65000 MT.
  2. the main game is here in chloro market. its one of the material is chlorine, wich is a bye product of caustic.
    their was a time when they had to pay reverse money to dispose of the chlorine which wa negative 7000 rs and now its around negative 1000 rs.
    so they have as good as free raw material and they have good value addition. their full current chlorine and future production of chlorine due to expansion of caustic will be used in expanded capacity of chloromethene.they are running at 100% capacity at present.
    here the margin are far better then caustic. It seems guj fluro is unable to take full advantage is due to is only around 100000 mt. so chlorine is only for 65000 mt and capacity they have is 105000 mt.
    the chloromethene is used in pharma ind and they have plenty of pharma co around Hyderabad. they have already replaced Guj Fluro around Hyderabad pharma co.
  3. power cost…
    the main culprit in TGV profitability is power cost. its around 480 cr . and they can gain immense by reducing it . so they have taken many steps like their sister concern Rayalseema hypo is importing coal for capative consumption and balance they sale in market.
    also upgradation of membrene tech to zero gap
    but main step is they are in process of setting up solar power plant. they are in consultation for setting solar plant. they are saying they want to use min 40 % to 50 % solar power by april 2020., which is 30% min cheaper . so cost saving is immense on even present 480 cr total power bill.they said here around factory plenty of waste land available at very cheap rate.

based on current 6 month performance expected to clock turnover of around 1300 cr in full year and out of that 30% will be chloromethene products.
they expect profitability to be maintained even if caustic price goes down as profit will be maintained by chloro sales.
they dont have anything big contingent liability to provide now as the remaining liability are the case wich they have already won in high court and now state elec board has files in supreme court. but they still may write down around 3 cr balance of bellary plant .
they have around 58 acre of land in bellary power.

they had proposed to infuse 56 cr in company by way of equity at 37 rs. and out of 340 cr total capex they are planning to take 200 cr loan and balance internal accrual…

  1. their fatty acid and soap plant they are scalling down the operation as their they have to buy castor in cash and sell finished product in credit. so its big work in capital guzzler which increses finance cost , also they are importing raw material and it has wide fluctuation so loss due to derivative and exchange fluctuation. they says loss will be reduced to minimum from april 19.

about caustic import and price

price is fluctuating and had gone to 35000 but recently it has again shot up to 40000.as the fear of import has come down. as per new norm every import of caustic needs BIS certificate. and many shipments are stuck at port due to low quality . and they are emphasising on forward value addition of chloro products so profitability is not impacted.

disclaimer : my views are may be biased as i am invested in this company

4 Likes
(HIMSHAH) #29

please any member who is tracking chloromethene market or have insight please give additional input as i dont have much info on chemical products…

(HIMSHAH) #30

They are already in finalisation of setting up power plant , wich may be in operation in 15 months . they are not building it but they are just asssuring power offtake from tht first plant. so they dont have any liabilities of maintainence and running of it. next step may be setting of their own plant at wasteland around their plant .

1 Like
(HIMSHAH) #31

ADMIN ji,
please can u change name of thread to TGV SRAAC ( sh rayalseema alkalies) as name have changed

(HIMSHAH) #32

A very good results. Improving quarter by quarter. Also have shown good results when at one point in this quarter price of caustic had gone to 35000. Which from January 19 has steadily increased to 43 + .
Fear of import for time being has gone. In nov total import was around 10 cr as per data.

(HIMSHAH) #33

Detail result. It has provided for some exceptional exp of 11 cr too.

(Raminder) #34

Yes , Chemical business is doing remarkably well if one conside it alone and eliminating extraordinary items , additional interest costs with settlement of electricity dues , nine months numbers are fantastic. Additioanl capacity of over 60 % has also now become operational and going forward will improve the financials. Looking at last 6 quarters results company has also been doing cleaning up job of the financials and hopefully no more shocks will be there after close of FY 2019. Why is company continuing with the Oil & fat business is difficult to understand.

(HIMSHAH) #35

I asked the management about fatty acid business. They have said as it’s needed as integral part of their plan for their some products. So not able to stop it completely. But they are taking steps so loss is minimum. And they hope that from April 19 quarter it will be run on no loss basis.
About past liabilities they said they have provided more then required to take benefit of tax planning. And now nothing major remained except where pending case are in their favour in supreme court.
Also one more thing they said in AGM. Out of 161 cr long term loan 90 cr will be written back mostly before march 19 which they have to receive from govt as incentive. Govt have promised release of incentive before year end and they have already received some small amount to begin with. This will bring down their liabilities by 90 cr. Which they have not accounted yet.
. If we take each quarter profit of 30 cr approx without considering write of which is just book entry . Annually 120 cr +around 50 cr depreciation . Company earning 170 cr cash annually on market cap of 300 cr .

7 Likes
(HIMSHAH) #36

Yday s caustic price was 44 Got from dealer in Mumbai. He purchased from meghmani org. Just for update on price…

(camadhav) #37

Any update on disposal of karnataka plant?

(camadhav) #38

Hi… Any update given by management on disposal of karnataka plant?

(HIMSHAH) #39

They had already clarified that they won’t sell land. They are already in process to sell genset etc. Land value potential is huge their. They may use it for some future plan. They hold plenty of land around TGV too.

(Ayush Mittal) #40

Could you also check price for clorine? Its pretty surprising that many of the caustic soda cos are trading at less than 5-6 PE multiple despite product prices being firm