So many amalgamtion. Its getting really difficult to value this company
I went through all the documents of amarjyot chemical available on MCA.
Following are key takeawys:
- Currently sales is bifurcated into 2 main chemicals- Para Nitro Aniline(39%) & Ortho Chloro Para Nitro Aniline(57%).
- Google search indicated Uses of amarjyot’s products as dye stuff & industrial use
- Major RM is (3,4 DCNB) & (PNCB). All RM is domestically procured.
- Got financials for FY14 & FY15
- Clean BS with no debt. Good Working Capital Management.
- Sales '15= 71cr & '14= 68cr. EBITDA margin 12%
- Good FAT. At FA of 8.3cr generating revenue of 70cr
- Concern= 11cr of loan and advances generating interest of 1.25cr
- Directly related to Aarti group via stake of Gogri and desai family
- Aarti manufactures both the chemicals amarjyot does and aarti also manufactures RM of amarjyot
Doubts- Can any one with chemical background help to understand that is there any form of synergy or vertical integration possible to valiant via acquiring amarjyot? Or is it done only for diversifing product line.
Does anyone has access to '17 and '16 Financials of Amarjyot?
Amarjyot is Also planning to do capex of 95cr which seems to be in phased manner currently being around 50cr. Attaching link to EC report
This is what I found on MCA website
There is a decline in PAT in FY 17 compared to FY 16. Results of FY 16 include merger of Dipso. I am not able to reconcile increase in Networth and PAT. Will need more details about dividends and shares issued for acquisition of Dipso.
PBT is high in FY17 compared to FY16,
This might be the management’s strategy.
Valiant’s RM is Phenols and products are Chloro Phenols (mono,di).
Amarjyot’s RM is 3,4 DCNB and PNCB (Chloro nitro benzenes) and products are para nitro anilines.
Phenols are produced using Chloro Benzene and Sodium Hydroxide. Chloro Benzene itself can be produced from Benzene and Chlorine.
Benzene + Chlorine -> Chloro Benzene
Chloro Benzene + Sodium Hydroxide -> Phenol + Salt
Now Benzene is cheaper than Phenol by about 50% and Benzene is an elementary hydrocarbon present in crude and is relatively easily available. Our own Reliance Industries which has its own petchem business produces Benzene in 3 Indian plants.
Now coming to Amarjyot, let’s see how nitro anilines are produced
Para nitro aniline is produced via the amination of 3,4 DCNB.
3,4 DCNB + Amine -> 4-Nitroaniline + NH4Cl
3,4 DCNB is currently procured as RM by Amarjyot. It can be produced from Chloro Benzene
Chloro Benzene + Nitric Acid -> 3,4 DCNB + Water
Chloro Benzene itself can be produced from Benzene and Chlorine as we saw above. Chloro Benzene is an intermediate in the manufacture of both Phenol (Valiant’s RM) and 3,4 DCNB (Amarjyot’s RM) and Benzene is the base RM for both that comes from Crude.
Now the company may have plans to procure benzene domestically and produce both RMs in-house to cut costs. This is just an educated guess when they are talking of synergies going by my basic understanding of Organic Chemistry. Of course equations are easy on paper but industrial production could be a completely different thing as there are lot of toxic chemicals involved in the process - Chlorine, Hydro Chloric acid, Nitric acid and intermediate wastes and probably clearances for the same but if there is any synergy in terms of integration, then this could be it.
Thanks a lot, this helped big time in understanding the entire process. I have few doubts, please help:
1.) In amarjyot’s case, even Ortho Chloro Para Nitro Aniline is could be produced from chloro-benzene?
2.) As you mentioned benzene is easily available, the manufacturing of Chloro-benzene is a complex task or a simple one? Any clue whether it requires dedicated facility?
Yes. OCPNA is produced by chlorination of para-nitroaniline (their other product) in acid. They both vary by just one Chlorine atom substituted in the ortho position.
There seem to be quite a few manufacturers and exporters for mono Chloro Benzene in India so it must be a common process.